Q4 2023 Oddity Tech Ltd Earnings Call

Operator: Subs by www.zeoranger.co.uk Good morning and welcome to ODDITY's fourth quarter and full year 2023 earnings conference call. Today's call is being recorded, and we have allocated time for prepared remarks and Q&A.

Good morning, and welcome to Oddities fourth quarter and full year 2023 earnings conference call.

Today's call is being recorded and we have allocated time for prepared remarks and Q&A.

Operator: Please note the prepared remarks for this morning's call have been posted on ODDITY's investor relations website for reference. At this time, I'd like to turn the conference over to Maria Lycouris, Investor Relations, for ODDITY. Thank you.

Please note the prepared remarks for this morning's call have been posted to oddities Investor Relations website for reference.

At this time I'd like to turn the conference over to MS. Maria I'll of course Investor Relations for oddity.

Thank you you may begin.

Maria Lycouris: You may begin. Thank you, operator. I'm joined by Oran Holtzman, ODDITY co-founder and CEO, Dr. Evan Bao, ODDITY's Chief Science Officer, and Lindsey Druckerman, ODDITY's Global CFO. 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. Such forward-looking statements involve risks and uncertainties, and actual results can differ materially due to a variety of factors. These factors are described in forward-looking statements in our earnings press release issued yesterday and in our annual report on Form 20-F filed with the Securities and Exchange Commission on March 5, 2024. We do not undertake any obligation to update forward-looking statements, which speak only as of today.

Thank you operator, I'm joined by Iran Hoffman.

Under his CEO Doctor Evans, our Chief Science Officer, and Lindsay Drucker Mann Oddities Global CFO.

As a reminder, management's remarks on this call do not concern past events are forward looking.

These may include predictions expectations or estimates.

Any statements about our business strategy market opportunities future financial performance and potential long term success.

These statements involve risks and uncertainties and actual results could differ materially due to a variety of factors.

Factors that are described under forward looking statements in our earnings press release issued yesterday.

And our annual report on form 20-F, I don't think that's true.

Ladies and Exchange Commission on March 24, we.

We do not undertake any obligation to update forward looking statements, which speak only as of today.

Oran Holtzman: 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, is included in our earnings press release, which we issued yesterday. I will now hand the call over to Oran.

Finally during this call we will discuss 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 definition.

Earnings press release, which we issued yesterday.

I'll now hand, the call over to Rod.

Oran Holtzman: Thanks, Operator, and thanks, everyone, for joining us today. Our fourth quarter was another record-breaking quarter to cut off a record year. We continue to deliver very strong financial results that are ahead of what we promised. In 2023, we reach two important milestones, one, surpassing $500 million in revenue, and two, generating over $100 million in adjusted EBITDA. We did it via our online platform that was launched only five years ago in a category that everyone told me doesn't and cannot work online.

Thanks, operator, and thanks, everyone for joining us today, our fourth quarter was another record breaking quarter, two golf ball ever could yeah.

Continuing to deliver very strong financial result, that's all I had.

But the problem is.

In 'twenty two 'twenty three we reached two important milestones one surpassing 500 million bullets of revenue into generating over 100 million below adjusted EBITDA.

We did it would be Oh, my gosh, it was only five years ago.

Everyone told me, but then you cannot work on line.

Oran Holtzman: The ODDITY platform has today over 50 million users and over 2 billion data points that fuel our business and are responsible for our strong financial results. Our financial results for 2023 were outstanding. We grew net revenue 57% to $509 million and adjusted EBITDA 173% to $107 million, achieving 21% of adjusted EBITDA margins. Once again, beating our guidance across revenue, profit, and earnings per share, not just for the full year but every single quarter. We basically grew way more than I wanted us to grow.

The only two blocks of them has to deal with 15, removing another 2 billion data points that fuel our business.

I was responsible for the strong financial results.

All the financial results for finished 23 were outstanding we grew net revenue was 57% to $509 million and adjusted EBITDA, 173% to $107 million achieving 21%.

Adjusted EBITDA margin.

Once again, beating our guidance across revenue profit and earnings per share not just for the full year, but every single quarter.

We basically grew way more than I wanted us to grow.

Oran Holtzman: In my view, there is no good reason to grow 50% at our scale. But due to both Spoiled Child's ability to bleed scale and Illumakiai's stronger-than-expected repeat rate, we landed at a 57% growth rate in the full year. Drilling down to the brands, Il Makiage delivered a very strong year in both color and skin. Skin grew to around 20% of its sales in 2023, which is a very high rate of category expansion for any beauty brand. It is a testament to our data-driven platform, to the strength of the brand, its enormous potential reach, and the quality of its products. Il Makiage is well on its way to achieving my target of $1 billion in sales within the next five years. Boy's Child scaled insanely fast in 2023.

In my view there is no good reason to grow 50% at our scale.

But due to both sports child's ability complete scale and in a much stronger than expected repeat rate, we landed at 57% growth rate in 2023 full yet.

Drilling down to the brands either Lucky I, just delivered a very strong year in both color and skin skin grew to around 20% I still think twenty-three free which is very high rate of category expansion for any beauty brand, which is a testament to all the data driven platform to the strength of the brand its enrollment potentially reach.

And the quality of its products.

Yes, it's well on its way to achieving my target for $1 billion.

We need the next five years.

Boy child scaled insanely fast in 20th century since it was a one year old brand I wanted to test the bench strength and cleaning and therefore I allowed the hyper growth.

Oran Holtzman: Since it was a one-year-old brand, I wanted to test the brand's strengths and its limits, and therefore, I allowed for hyper-growth. Spoiled Child grew 325% from last year to $110 million in net revenue, and we did it profitably, across multiple categories and with more than half of our sales from repeat customers. We believe Spoiled Child's success is unprecedented anywhere in direct consumer, and it just shows again the strength of ODDITY and the demand for beauty online. Most importantly, for 2023, we build strong foundations to drive our future. The Ravella acquisition and establishment of ODDITY Labs is a game changer for the industry. We are all in on building the biggest and most advanced platform for new molecular discovery. I believe it will be a huge growth engine for all our brands and, therefore, it's a top priority and focus for me and for my sister Shiran. But I'll touch on that more shortly.

Well, it's a good 325% from last year to 110 million, both net revenue and we did it profitably across multiple categories and with more than half of our retail from repeat customers. We believe spoil chassis.

They've been doing anyway in direct to consumer and it just shows again, the strength of OTT and the demand for beauty online.

Most importantly, we're putting 23, we've been strong foundation to block all the future they reveal acquisition and establishment of OTC lab is a game changer for the industry. We are all aimed at building the biggest and most advanced class fulfill new molecule discovery.

I believe it will be a huge growth engine for all of our brands and definitely the top priority and focus for me.

Just a few of them, but that's at most okay.

Oran Holtzman: The new brand, another massive growth engine for us, where we made a big investment in brands three and four, which are on track to be launched in 2025. Finally, we took ODDITY public. Again, we did it to build something huge. And because we believe there is unlimited growth potential for us. So to recap, 2023 was a very, very strong year for ODDITY.

No Brian another massive growth engine for us, where we made big investments in Brent Ti and Brent for which are on track to be launched in 2025.

Finally, we took what did she probably again, we did it to build something huge and because we believe there is unlimited growth potential for us.

So to recap the 20th century was a very very strong year for what do you think.

Oran Holtzman: We deliver 57% growth and 21% EBITDA margin, the top percentile of public companies out there. We beat every quarter of 2023 with scale, growth, and profitability. We crossed the $500 million milestone of net revenue. We crossed the $100 million milestone of adjusted EBITDA.

We delivered 57% growth in 'twenty, along with an EBITDA margin topped with some type of public companies out there.

We beat every quarter, that's really 'twenty, three with scale growth and profitability.

We closed a 500 million daus myself that revenue, we closed the $100 million.

Adjusted EBITDA, we established what did your lab is an industry leading molecule discovery platform, followed by the acquisition and integration of for Villa. We took the company public we didn't amazing children debate and we finished the year with a very strong balance sheet, including $168 million of cash and short term investments with zero debt.

Oran Holtzman: We established ODDITY Labs as an industry-leading molecule discovery platform, powered by the acquisition and integration of Ravella. We took the company public with an amazing show on the beach. And we finished it with a very strong balance sheet, including $168 million of cash and short-term investments with zero debt. This is ODDITY.

This is all the things we work really hard to do more than most other companies out there.

Oran Holtzman: We work really hard to do more than most other companies out there. The hunger, the start-up DNA, and our always-on competitive mode are our biggest assets that allow us to keep on delivering. So 2023 was amazing, but it's already the past, and what's most important now is our future.

They started DNA and they'll only on competitive moat.

Although biggest thought that that allow us to keep on delivering.

So plenty twenty-three was amazing, but it's already the pad and what's most important now it's all the future.

Oran Holtzman: Our latest focus in 2024 is on executing opportunities that we believe will drive our business for many years. Let me walk through the biggest priorities for EMA in 2020. First, continuing to grow EMA cash and spoilage.

Laser focused in 'twenty 'twenty four is on executing opportunities, which we believe would probably be best for many years.

Let me walk through the biggest player is call it maybe 2024 <unk>.

To grow in Mckesson's Boy child.

Oran Holtzman: As I said before, our goal for both brands is to grow to $1 billion in revenue for each brand. With strong, separated leadership teams for each brand, with huge, aggressive markets, and a massive advantage online where the demand is only growing, it can and should be done. So many ways to grow.

I said before we're going for both brands used to grow 1 billion total revenue for each brand with strong stipulated leadership team for each band, which skewed the vegetable market with massive advantage online where the demand is only growing it can and should be done. So many ways to grow adding new products expanding to new categories opening up new markets.

Oran Holtzman: Adding new products, expanding to new categories, opening up new markets. All growth initiatives are in place and ready to pull the trigger, so I feel very confident in the ability of my teams to deliver. Bullfin Maquillage and Spoiled Child are off to a strong start in 2024. Based on our performance in just the first two months of 2024, combined with our outlier repeat rates, we have visibility into delivering our goals in 2024. So that was about spoiling child rearing maquillage.

All the growth initiatives are in place and ready for pulling the trigger so I feel very confident in their ability.

So the live.

Both the Macchiato boy child off to a strong start in 'twenty 'twenty four based on our performance and just the first two months of 'twenty 'twenty four combined with other outlier repeat rates, we had visibility into delivering double goes to 10 24.

So that was the votes for each other and with you guys.

Oran Holtzman: Second, we have two new brands, Brand 3 and Brand 4, which we are building to be our next in-house engines. Both brands have separate data ship teams to ensure they win without distracting the existing brands' runways. As a reminder, Brand 3 is a medical-grade skin and body brand. Issues like acne, eczema, and other skin issues are a huge pain point for users, and the majority of them tell us they are unsatisfied with the current solution.

Second as new brands, Brent Ti and Brent for which we are billing to be able to you know changing both brands that's separate to the leadership team to ensure they win without distracting the existing brands runway as a reminder, frankly, if somebody could wait skin and body brand you shouldn't like Ahmed ex Denmark and other equally all the huge painful for all of us.

And the majority of them tell us they are satisfied with your core solution.

Oran Holtzman: The user experience is bad, and the products on the market don't work well. With Brand 3, we are building end-to-end solutions that position us to win. This includes a third-of-a-kind mobile platform that uses data, AI, and computer vision to deliver diagnosis, a precise treatment protocol, and coaching to ensure user compliance and success. It also leverages ODDITY Labs to develop high-performing products from our proprietary molecules that truly solve consumer skin issues and concerns. Brand strong, we have not yet announced the category, but we are confident in its ability to grow very fast. Last but not least, is ODDITY Labs.

User experience is bad and the product on the market don't work well. We frankly, we are building end to end solution that position us to win these include kind.

And mobile platform that uses data AI and computer vision to believe that the agnostic and precisely the protocol and the coaching to ensure their music compliance and success.

It also leverages quality labs to develop high performing products for multiple types of a molecule that truly solve consumer skinny issues and concerns.

Paul we have Nokia getting Alex that category, but we are confident in its ability to grow very fast.

But they'll pay European potential is what did he loves what we are building and that is fully disruption. If we do it right. What do you see that will change our industry and our company. The potential is unlike anything that they saw in the industry, even more debt on looking for like five years ago with my focus has always been as a company and what does he loves dull.

Oran Holtzman: What we are building in the labs is full disruption. If we do it right, ODDITY Labs will change our industry and our company. Their potential is unlike anything that I have seen in the industry, even more than unlocking it online five years ago. With my focus, our speed as a company, and ODDITY Labs' talent, we have a first-mover advantage, and we will see the results in two or three years. Big bet, but a huge swing.

And we have a first mover advantage and we will see the results in two three years from now big bet, but you'd see.

Oran Holtzman: To summarize, I remain very bullish about what we are building here at ODDITY. Beauty and wellness is one of the most attractive markets in the world. Huge, growing, profitable, with so many categories to drive our business. But at the same time, the market is held back by legacy models that are completely stuck in the past. I see two unstoppable pillars of transformation in our industry, and we have positioned ODDITY far ahead in order to win in both. The first pillar is online.

To summarize I remain very bullish about what we are building a quality beauty and wellness is one of the most attractive market in the world huge growing profitable with so many categories to drive our business at the same time. The monkeys are held back by legacy models does he tell completely stuck in the past.

I have two unstoppable pillows transformation in our industry and we have positioned ODT father had in order to win in both the first pillar is online I believe only will be the largest channel in the coffee growing at 50% or more.

Oran Holtzman: I believe online will be the largest channel in the category at 50% or more, and we have made massive investments in technology, in data, in AI, and computer vision in the past six years to ensure we have what we need in order to win. This muscle is what allows us to lead online and to build a portfolio of large D2C brands with very strong financial profiles. So the shift to online is an unstoppable trend, I see, and we are already leading on this front. The second pillar of transformation in our industry is the shift towards science-backed products. The consumer today is smarter than ever.

And we made massive investments in technology, and data and AI and computer vision in the past six years to ensure we have what we need in order to win.

These muscle is what allows us to live online and to build that book.

Florida D to C band with very strong financial profile.

So the shift to online users unstoppable trend I see and we are already leading on this fall.

Second pillar of transformation in our industry is the shift towards science backed product.

The consumer today is smaller than ever we can see it and how they engage in our platform the amount of time to spend reading about the old products and how much they care about our ingredient well.

Oran Holtzman: We can see it in how they engage with our platform, the amount of time they spend reading about our products, and how much they care about our ingredients. Although pharma and biotech have made insane progress in the past two decades, the beauty industry, even us, has fallen short. We're mixing all ingredients in new packaging. This creates an incredible opportunity, and this is what we are doing with ODDITY Labs, using digital biology to discover and own the next generation of science-backed category killers that consumers love. What we are doing with our labs in Boston is the same as what we did with our R&D center in Tel Aviv.

Although pharma and biotech hadn't St progress in the past two decades, the beauty industry, even us falling short.

Only agreed in new packaging. This creates an incredible opportunity and this is what we are doing but did you loved using digital biology to discover and own. The next generation full size bed category killers that consumers love, what we're doing with loved in Boston is the same what we did with.

I'll Review center in Tel Aviv.

Dr. Evan Bao: But this time, instead of transforming the experience, we are transforming the products themselves, and I believe it will be huge. So with that, let me hand the call over to Dr. Evans Zhao, our Chief Science Officer, to dive deeper into what we are building at Abbott. Thanks, Oran.

But this time instead of transforming experience, we are transforming the product themselves and I believe it will be huge so with that let me hand, the call over to Evan Zhao Our Chief Science Officer.

Dive deeper into what we are believing that.

Thanks, Ron I'm Dr.

Dr. Evan Bao: I'm Dr. Evan Dapp, Chief Science Officer of ODDITY, and I lead the team at ODDITY Lab. I joined ODDITY with the acquisition of Ravella, which is a biotech that my co-founders and I started while doing research at Harvard. At the time, we were pioneering digital biology for therapeutic development at the Wyss Institute. We saw what we thought was a once in a generation opportunity to close a huge technology gap, really a gaping deficiency of science in the beauty and wellness industry. We are living in the golden age of science, where new technology has allowed pharma and biotech to innovate at an unprecedented pace. Yet, the beauty and wellness industry is still living in the dark ages.

So I'll start auditing and I lead the team the oddity that I.

Hi, joint R&D with the acquisition of Red Bell, which is a biotech that my co founders and I started doing research at Harvard.

We are pioneering digital biology for therapeutic development at the least.

We saw what we thought was a once in a generation opportunity.

Or was there a huge technology.

Really a gaping deficiency of science, and the beauty and wellness industry.

We are living in the Golden age of science, when new technology has allowed pharma and biotech to innovate.

Hey.

Yeah, the beauty and wellness industry is still living in a dark agent.

Dr. Evan Bao: No molecule innovation, totally commoditized, just old ingredients repackaged and not addressing consumer problems. It doesn't make sense given the size of the beauty industry, a huge tan with zero real size. So this is the massive opportunity we are running at WITLAB: unleashing the full power of technology and digital biology to discover groundbreaking ingredients that really perform, that really solve consumer pain points, and can power the next generation of categories. This is what consumers want. Based on the data we've seen out of this massive user base, the consumer is way smarter than before, and cares less about brands and more about efficacy. But we are still in the early days. The shift will be enormous over the next decade. A few words about the field so it will be easier to understand what we do at Auditing Lab. Digital biology is the marriage of breakthrough technologies, including AI and synthetic biology.

No molecule innovation totally commoditized, just old ingredient repackage and not addressing consumer problem.

It doesn't make sense.

The beauty industry, a huge Tam with zero real time.

So this is a massive opportunity we are running at with lab.

Unleashing the full power of technology, and digital biology discovery groundbreaking ingredient.

Really perform and really solve consumer pain points.

The next generation of category killers.

This is what consumers want.

On data, we see out of these massive user base the consumer is waste smarter than before.

That's about brand and more about efficacy.

We're still in early days the ship will be enormous over the next decade.

Do you worry about the field it will be easier to understand what we'd do it.

Digital biology is the marriage of breakthrough technologies, including AI.

Myology it is widely used across pharma today, but not in our industry and do you think knowledge allow us to do three things that were never before possible.

Dr. Evan Bao: It is widely used across pharma today, but not in our industry, and these technologies allow us to do three things that were never before possible. 1. Measure data at scale. 2. Analyze massive data sets at scale.

One measure data too.

Thank you.

Massive datasets at Apio.

Dr. Evan Bao: And 3. Bioengineer solutions based on this data. The discovery process in digital biology is revolutionary compared to the status quo.

And three violent generic solution based on this data.

The discovery process and digital biology is revolutionary compared to satisfy the status quo. Today is basically the same ancient approach used with Chinese herbal medicine or <unk>.

Dr. Evan Bao: The status quo today is basically the same ancient approach used with Chinese herbal medicine of trial and error. Let me give you an example starting with skin age. The dominant solution for skin tightness on the market for decades has been Retinol. Red Mill's discovery was an accident.

Eric Let me give you examples starting with <unk>.

The dominant solution for skin tightening up on the market for decades has been bad.

Discovery was an accident it was there.

Dr. Evan Bao: It was originally used to treat blindness, but like so many solutions in our industry, it was meant for something else and has been repurposed for the skin. Along the way, scientists optimized using chemistry and formulations to make it the best skin tightening solution it could be, which, by the way, is not great. This means we are left with an ingredient that doesn't work that well, that has all kinds of side effects, and is a bad user experience because it causes skin peeling and purging, that you can't even use if you're pregnant. This is what consumers have to settle for. So let's compare that discovery process with how we did it at Audity Lab and how we discovered fibroquine, our proprietary skin health molecule, which twice being in V1, already outperforms retinol with stronger efficacy, making skin tighter and bouncier and higher user satisfaction.

Really used to treat blindness, but like so many solutions in our history, it was <unk> or something else and repurposed for skin <unk>.

The way I, just optimize using chemistry and formulation to make it past skin tightening solution it could be.

By the way is not a great one.

Which means we are left with an ingredient it doesn't work that well.

All kinds of side effects.

User experience because it causes skin peeling and parking.

Now you can't even use.

This is what consumers have to settle for.

So, let's compare that discovery process with how we did it at oddity lap how do we just havent been a proprietary skin households, which are fighting and D want already off bonds right now with stronger efficacy tighter about here higher user satisfaction.

Instead of trial and error, we start with the skin itself.

Dr. Evan Bao: Instead of trial and error, we start with the skin itself. We make biological models, which are essentially pieces of skin in a dish, modified so they can give us measurable data. We take thousands of these pieces of skin and then expose them to thousands of different molecules, and we measure and track how each skin piece interacts with each individual molecule.

Biological model, which are essentially keeping the skin in a dish modified so they can give a measurable data.

We see thousands of these pieces of kit and then expose that each the thousands of different molecule and we measure and track how each skin piece interacts with each individual molecule.

We didn't see that information into an AI emulate how about the same.

Dr. Evan Bao: We then feed that information into an AI that simulates how that same skin would interact with not a thousand molecules but a billion different molecules. We then identify dozens of molecules that make the skin better. And from these dozens of hits, we test for things like toxicity, efficacy, safety, and specificity until we find the absolute winner. The difference between these two approaches, the industry-standard trial and error approach, versus our digital biology discovery platform, is revolutionary. We are catalyzing a pace of discovery and innovation that our industry has never seen, with massive benefits for consumers. Fibroquine is twice as good as retinol in double-blind clinical trials for increasing skin elasticity, but it is also substantially safer than retinol in every single test we've run, including how it affects other cells in the body and assays mimicking long-term effects.

But interact with about a thousand molecules, but with a billion different molecule.

We didn't identify duggan of molecules that makes us better and from these dozen that we test for things like toxicity efficacy safety.

Until we find the absolute.

Different in these two approaches.

Centered trial and error approach versus our digital biology discovery platform is revolutionary we're capitalizing our pace of discovery and innovation in our industry has never seen with massive benefits for consumers.

Not only is twice as good as a double blind clinical trial for increased elasticity also substantially safer than retinol in every single category.

Including how does that other cells in the body.

A long term effect.

Plugging into oddities user platform allows us for the first time.

Tumors and as our design partner.

We have a direct dialogue to understand their pain points, but also how they want the product to work what's the form factor should be what attributes matter in the formulation in order to make sure the users.

Dr. Evan Bao: Plugging into these massive user platforms allows us, for the first time, to bring consumers in as our design. We have a direct dialogue to understand not just their pain points but also how they want the product to work, what the form factor should be, and what attributes matter in the formulation in order to make for the best user experience. Over the last year, since joining forces with ODDITY, we have dramatically scaled our capabilities. We're growing a super-elite team of PhDs and scientists from top institutions who are empowered by our entrepreneurial culture and the chance to see their ideas make real change for tens of millions of consumers around the globe. We have massively expanded our roadmap to address huge market opportunities. We believe we can dominate in hair.

Over the last year since joining forces with oddity dramatically scaled located.

We're growing a super elite team of Phds and scientists from top institution.

Powered by our entrepreneurial culture, and a chance to see their idea make real change for tens of millions of consumers around the globe.

Massively expanded our roadmap to address the huge market opportunities. We believe they can dominated her leaving a dominated Jim.

Hey somebody.

We believe we can create a next generation high performance.

And this is just the beginning.

We are making big investments in our team and our.

And our.

Product development capabilities.

And an extensive focus groups and trial.

This effort in two to three years, you will see real science backed product for fall disruption to take massive market share.

Dr. Evan Bao: We believe we can dominate in skin, face, and body. We believe we can create the next generation of high performance cosmetics. And this is just the beginning. We are making big investments in our team, in our lab, in our product development capabilities, in our tech, and in extensive focus groups and trials in order to support this effort. In two to three years, you will see real science-backed products for full disruption to take massive market share. And with that, I'll hand over to Lynn.

With that I'll hand over to Lindsay.

Thanks, Kevin, Let's turn to our 2023 result, which I will refer to on an adjusted basis you can find a full reconciliation to GAAP in our press release.

Although he delivered a record breaking year on all accounts.

Net revenue by 57% to $509 million.

This was driven by both Yamana and boil child across a wide range of product categories.

We grew net revenue was 44% in the fourth quarter.

Similarly by growth across products and brands.

Lindsey Druckerman: Thanks, Evan. Let's turn to our 2023 results, which I will refer to on an adjusted basis. You can find the full reconciliation to GAP in our press release. Adobe delivered a record-breaking year on all accounts. We grew net revenue by 67% to $509 million. This strength was driven by both Il Mastiage and Spoiled Child across a wide range of product categories.

For the full year revenue growth was driven mostly by increased quarter. Although we continue to see improvement in average order value driven by order size product.

More than half of the oddities full year revenue was driven by repeat itself, which is remarkable when considering our scale and the speed at which we're growing.

Our revenue next continues to evolve with the addition of new brands categories and products in 2023, new categories like skin and hair increased materially as a percentage of our overall revenue mix.

Lindsey Druckerman: We grew net revenue 44% in the fourth quarter, driven similarly by growth across products and brands. For the full year, revenue growth was driven mostly by increased orders, although we continue to see improvements in average order value driven by order size and product mix. More than half of ODDITY's full-year revenue was driven by repeat sales, which is remarkable when considering our scale and the speed at which we're growing.

And we continue to see excellent growth had enormous runway in color, even as we push the scale new categories at a faster pace.

Expansion into new products and categories makes us even stronger it allows us to understand our users better. So we now know not just their makeup of cheap but also we had a holistic skin care makeup embolic debris heal well.

Lindsey Druckerman: Our revenue mix continues to evolve with the addition of new brands, categories, and products. In 2023, new categories like skin and hair will increase materially as a percentage of our overall revenue mix, and we continue to see excellent growth and have enormous runway in color even as we push the scale of new categories at a faster pace. Expansion into new products and categories makes us even stronger. It allows us to understand our users better, so we now know not just their makeup routines, but we also have a holistic skin, hair, makeup, and wellness 360-degree view.

We're gaining share and he's a wallet and doing it for very attractive incremental call.

This allows our financial model to deliver the kind of outsized returns you see in other land and expand model like software.

In addition, we're bringing in new users and converting new customers, who are now finding the product they want.

Before get them from a brand.

As a flywheel that's accelerating as our platform grows our users grow our data capabilities and technology right brand awareness grows and brand luck Greg.

We're seeing that benefit and increasing basket size higher average order value and further improving repeat and of course it increases the surface area that we operate in and extends our runway for growth.

So I'm Lucky I used delivered double digit profitable growth in 2023 across cosmetics and skin and as Ron mentioned I'm Lucky I skin is now 20% of the branch out.

Lindsey Druckerman: We're gaining share of user wallets and doing it for very attractive incremental costs. This allows our financial model to deliver the kind of outsized returns you see in other areas and expand models like software. In addition, we're bringing new users and converting new customers who are now finding the products they want but couldn't get before from our brand. It's a flywheel that's accelerating as our platform grows, our users grow, our data capabilities and technology grow, brand awareness grows, and brand love grows. We're seeing this benefit in increasing basket size, higher average order value, and further improving repeat.

Spoiled child came in at $110 million and not revenue.

Our expectation of $109 and that revenue for the year, increasing more than four acts from 2023 and doing it profitably with more than 50% of sales coming from repeat customers. It is an incredible accomplishment for brand growing so quickly and less than two years old.

Margin expanded 320 basis points for the year at 400 basis points for the quarter is better than expected gross margin expansion was driven by.

Why change and logistics efficiency initiatives at both brands.

Lindsey Druckerman: And, of course, it increases the surface area that we operate in and extends our runway for growth. Il Makiage delivered double-digit profitable growth in 2023 across cosmetics and skin. And, as Oran mentioned, Il Makiage's skin is now 20% of the brand sale.

Adjusted operating expense grew 42% for the full year slower than sales growth gets you, 7%, we were able to nicely leverage operating expenses right.

Lindsey Druckerman: Spoiled Child came in at $110 million in net revenue, ahead of our expectation of $100 million in net revenue for the year, increasing more than 4X from 2023 and doing it profitably with more than 50% of sales coming from repeat customers. It's an incredible accomplishment for a brand growing so quickly and less than two years old. Growth margin expanded 320 basis points for the year and 400 basis points for the quarter. This better than expected growth margin expansion was driven by specific supply chain and logistics efficiency initiatives at both brands. Adjusted operating expenses grew 42% for the full year, slower than sales growth of 57%.

The future growth drivers like ought to be lots of new brands.

In large part to the higher proportion of repeat sales in our overall revenue which are more profitable.

We also made investments to drive increased business efficiency.

Are you generally in AI across multiple consumer touch points, including advertising user experience and customer service.

Still very early in implementation here, but are seeing improvement across the P&L from better conversion to operating cost efficiency and we have not yet implemented generative AI to support coding and development.

Believes will save cost and drive efficiencies in the future.

We delivered adjusted EBITDA of $107 million for the full year and $16 million for the quarter full year adjusted EBITDA margins at 21% expanded 900 basis points from the prior year.

Lindsey Druckerman: We were able to nicely leverage operating expense despite stepping up investments in future growth drivers like Oddity Labs and new brands, due in large part to the higher proportion of repeat sales in our overall revenue mix, which is more profitable. We also made investments to drive increased business efficiency. We expanded our use of generative AI across multiple consumer touchpoints, including advertising, user experience, and customer service. We're still very early in implementation here, but we are seeing improvements across the P&L, from better conversion to operating cost efficiency. And we have not yet implemented generative AI to support coding and development, which we believe will save costs and drive efficiency in the future.

Gross margin expansion and higher mix of repeat offset by increased investment in future growth drivers.

We delivered adjusted diluted earnings per share of $1 31 for the full year and 75 for the quarter and reported diluted earnings per share of $1 eight for the same periods respectively.

Our asset light model and strong returns on capital once again very strong cash generation we.

We delivered $85 million free cash flow in 2023, and we exited the year with 169 of cash equivalents and short term investments on our balance sheet and zero debt.

Strengthened our capital position early in the year with $100 million credit facility that was used for general corporate purposes buybacks acquisition and I know you said.

Lindsey Druckerman: We delivered adjusted EBITDA of $107 million for the full year and $16 million for the quarter. Full-year adjusted EBITDA margins of 21% expanded 900 basis points from the prior year, driven by gross margin expansion and higher mixed repeat, offset by increased investment in future growth drivers. We delivered adjusted diluted earnings per share of $1.31 for the full year and $0.17 for the quarter and reported diluted earnings per share of $1.08 for the same period, respectively.

Turning to our outlook, we remain committed to our long term target of 20% plus revenue growth at a 20% adjusted EBITDA margin.

Reiterate the purpose of our 2020 strategy for revenue growth, 20%, two or three times faster than what legacy competitors are growing.

20% margin business is more profitable on an underlying basis, but in our view. There is no reason to deliver more than 20%. We're here to build something huge. Therefore every extra dollar of margin. We have we invest big that that can change the industry and support our long term growth.

Lindsey Druckerman: Our asset-light model and strong returns on capital once again support very strong cash generation. We delivered $85 million of free cash flow in 2023. And we ended the year with $168 million of cash, equivalents, and short-term investments on our balance sheet, and zero debt.

In fact, this is already proving to be a great use of our capital our track record of Green Dot has been very strong not just because of business already generate high returns on invested capital, but more specifically recall that we liked spoiled child with around $20 million about fun and as Ron said, we expect spoiled child will be a billion dollar brand.

Lindsey Druckerman: And we strengthened our capital position earlier this year with a $100 million credit facility that we can use for general corporate purposes, buybacks, acquisitions, and other uses. Turning to our outlook, we remain committed to our long-term target of 20% plus revenue growth at a 20% adjusted EBITDA margin. To reiterate the purpose of our 2020 strategy, for revenue growth, 20% is two to three times faster than what legacy competitors are growing. As for 20% margin, the business is more profitable on an underlying basis, but in our view, there is no reason to deliver more than 20%.

In 2024, specifically based on a very strong start to the year, we expect to be even better than these long term targets.

Net revenue will increase between 22 and 24% for the year driven by robust growth at both brands.

A pacing revenue we plan to deliver relatively consistent low to mid twenty's year over year growth every quarter across 2020 before turning.

Turning to profitability, we expect to deliver 75% gross margin for the full year and we expect to deliver adjusted EBITDA for the year between 136 and $140 million, which will include a step up in growth investments, including labs, a new brand.

Lindsey Druckerman: We're here to build something huge. Therefore, every excess dollar of margin we have, we invest in big bets that can change the industry and support our long-term growth. In fact, this has already proven to be a great use of our capital. Our track record of reinvestment is very strong.

Many of these growth investments is skewed to the last nine months of the year with limited impact on the first quarter.

We expect adjusted diluted earnings per share to be between $1 49, and $1 50 for full year 2024.

Turning to the first quarter as we discussed last year, we deliberately slowed the business down in the back half of 2023 in order to keep our growth while our teams focus on huge preparations for 2024.

Lindsey Druckerman: Not just because our business already generates high returns on invested capital, but more specifically, recall that we launched Spoiled Child with around $20 million of upfront investment. And, as Oran said, we expect Spoiled Child to be a billion-dollar brand. In 2024, specifically based on our very strong start to the year, we expect to do even better than these long-term targets. We expect net revenue to increase between 22 and 24% for the year, driven by robust growth at both brands.

We entered January with incredible strength and delivered a large acceleration in that business more than doubling in Q4 pace and doing it very profitably.

We began to pace ourselves ahead of plan, which because of our strong repeat already puts us in a position to picture our full year objectives and also leaves us the possibility to once again begin holding our revenue growth back to leave more room for the future.

Lindsey Druckerman: In terms of pacing revenue, we plan to deliver relatively consistent low to mid-20s year-over-year growth every quarter across 2024. Turning to profitability, we expect to deliver a 70.5% growth margin for the full year, and we expect to deliver adjusted EBITDA for the year between $136 and $140 million, which will include a step up in growth investments, including labs and new brands. The timing of these growth investments is skewed to the last nine months of the year with limited impact on the first quarter. We expect adjusted diluted earnings per share to be between $1.49 and $1.54 for the full year of 2024.

And control our teams have to flex the business. The precision is a huge strength for us and something really unique to oddity.

Given the very strong start to the year, we expect Q1 net sales growth between 23, and 25% you can find more details on our Q1 outlook in our press release.

And with that operator, we're ready to take questions.

Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate that your line is in the question queue.

And you May press star two if you'd like to remove your question from the queue.

For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Lindsey Druckerman: Turning to the first quarter, as we discussed last year, we deliberately slowed the business down in the back half of 2023 in order to pace our growth while our teams focused on huge preparations for 2024. We entered January with incredible strength and delivered a large acceleration in the business, more than doubling the Q4 pace and doing it very profitably. We quickly began to pace our sales ahead of plan, which, because of our strong repeat business, already puts us in a position to secure our full year objective and also leaves us the flexibility to once again begin holding our revenue growth back to leave more room for the future. The muscle and control our teams have to flex the business with precision is a huge strength for us and something really unique to ODDITY.

One moment, please while we poll for questions.

Thank you.

Our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question.

Thank you and good morning, everyone I wanted to ask about some of the newness that you were planning to roll out. This year I think you had talked about 10, new molecules our products. How many of those are out there already and is there any initial commentary on how those are performing.

Hi.

Thanks for the question. So I think that you're starting to labs in general just them for better understanding each brands aside from lab. Each brand has its own NPD departments and they were constantly developing new product and you kept it goes for the existing brands. So they have way more than 10 product.

Lindsey Druckerman: Given the very strong start to the year, we expect Q1 net sales growth between 23% and 25%. You can find more details on our Q1 Outlook and our press page. And with that, Operator, we're ready to take questions. Thank you.

Planting this year aside from that we have what we are billing lab, which are normally calls and that were funded Nicole loved and in the developed developing Y and correct them and we'll be ready for this year. It doesn't mean, we launch them. This year, we always have engines, we keep ready to be launched based on revenue growth.

We feel like we need more revenue, but then without them that this was always my approach with products. We've got to go with.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue.

And with other growth engine in two or three products, they're going to be launched shortly and again, we love loves them with test we see this inspection and then we go back and besides what scale, we want to see from this product.

Operator: And you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing start. One moment, please, while we poll for questions. Thank you. Our first question comes from the line of Lorraine Hutchinson with Bank of America. Please proceed with your question. Thank you, good morning, everyone.

In the quarter or what are called the rest of the year, but yet all the 10 products, we'd be ready to be launched.

To them, it's up to them.

Okay, and thank you Lindsay I wanted to clarify a point that you made I'm talking about entering January with incredible strength I think he said you doubled the four keep pace. So can you square that commentary with.

The revenue guidance, which implies a slower growth than that I guess, how much did you pull back on the acquisition spending and.

Lorraine Hutchinson: I wanted to ask about some of the new things that you were planning to roll out this year. I think you talked about 10 new molecules or products. How many of those are out there already, and is there any initial commentary on how those are performing?

Yeah, and any other color you can give on on the rest of the quarter after that strong start to January.

Sure happy to so.

One important differentiator between our model and our.

Oran Holtzman: Thanks for the question. I think that you're referring to labs. In general, just for a better understanding, each brand, aside from the lab, each brand has its own NPD department, and they work constantly on developing new products and new categories for the existing brands. So they have way more than 10 products launching this year. Aside from that, we have what we have built in labs, which are new molecules that we are starting to call.

Many of the sort of legacy consumer models or beauty models that you're familiar with the sort of requirement as the having stores are being brick and mortar to have a constant flow of inventory onto the shelves, which is really matched up to where customer traffic and demand is for us because we are direct to.

And because we have full.

Full control over our pace of acquisition, we set that we set that pace, we pulse that spend and so what you've seen us do in the past has come out really swinging in the first quarter and then significantly dialing down and you know really shutting off all new user acquisition into the back half of the year and that's why.

Oran Holtzman: Labs in the development stage are on track and will be ready for this year. But it doesn't mean we will launch them this year. We always have engines we keep ready to be launched based on revenue growth needs. If we see that we need more revenue power, then we launch them. That this has always been my approach with products, with categories, with geography, and with other growth engines. Two or three products are going to be launched shortly. And again, we launch them, we test them, we see their satisfaction, and then we go back and decide at what scale we want to see from this product in the quarter or for the rest of the year. So yes, all 10 products will be ready to be launched. If we launch them, it's up to us. Okay, and thank you.

Our first half has been so frontloaded relative to our second half it's not because beauty is big in the first quarter. In fact, the opposite if you look at all of our all of our competitors. It's the opposite for key was the biggest and so for us to what I was referring to is in the third quarter, we delivered $97 million or sorry in the fourth quarter of 97 million.

And that revenue and you know what our <unk> guidance is were significantly we basically on a dime turn the business back on which is it's not easy to do and again something that we have particular strength and so that we really really ramped up and we saw demand explode, which was amazing we.

Lindsey Druckerman: Lindsay, I wanted to clarify a point that you made talking about entering January with incredible strength. I think you said you doubled the 4Q pace. So can you square that commentary with the revenue guidance, which implies slower growth than that? I guess, how much did you pull back on acquisition spending and, Yeah, and any other color you can give on the rest of the quarter after that strong start to January? So, I think one important differentiator between our model and many of the sort of legacy consumer models or beauty models that you're familiar with is this sort of requirement to have stores or be brick and mortar to have a constant flow of inventory onto the shelves, which is really matched up to where customer traffic and demand is.

Had been preparing for it and expect it but it's always fun to watch that business really rep and we were so pleased with you know Gee.

And fab.

And what we've seen in early March because of all the repeat in our business, we have very high visibility into achieving our full year objectives now I'd be 'twenty 'twenty four is basically in the bag, which is great and so I wouldn't I'm not so I think you may be referring to the year over year growth rates, which is not the right way to think about it since we're really managing this.

In terms of demand pulse, so we increased 44% on a year over year basis for Q4, it's a much smaller quarter for us that's almost entirely repeat sales for us in Q4 and now we've really turned the business on and we're managing to try to get much closer to that kind of our 20% long term target for 'twenty 'twenty four although were.

Lindsey Druckerman: For us, because we're direct-to-consumer and because we have full control over our pace of acquisition, we set that, we set that pace, we pulse that spend. And so what you've seen us do in the past is come out really swinging in the first quarter and then significantly dialing down and, you know, really shutting off all new user acquisition into the back half of the year. And that's why our first half has been so front-loaded relative to our second half. It's not because beauty is in the first quarter.

Slightly ahead of that at 22 to 24, that's the type of growth rate. We think is appropriate for the business to sustain and we plan to deliver in that range every quarter of this year.

I would just add one more thing that and again in Q1 at the beginning of every Q1, we start again opening our user acquisition.

Lindsey Druckerman: In fact, the opposite. If you look at all of our competitors, it's the opposite. 4Q is the biggest. And so for us, what I was referring to is in the third quarter, we delivered $97 million of, sorry, in the fourth quarter, $97 million of net revenue. And you know what our 1Q guidance is, we're significantly, we basically turned the business back on, which is not easy to do and, again, something that we have particular strength. And so we really, really ramped up, and we saw demand explode, which was amazing. We had been preparing for it and expected it, but it's always fun to watch the business really take off. And we were so pleased with, you know, Jan and Feb and what we've seen in early March because of all the repeat business in our business. We have very high visibility into achieving our full year objective now. 2024 is basically in the bag, which is great.

Despite the high scale that we had in the past two months, we have seen an improvement in all of our marketing efficiency has been done to fraud in Q1 of 'twenty to 'twenty three so do we like we pushed and.

And and we started again and to acquire new users. The results are very strong and we don't do it just because we need to do it when the market allow us and we see a message to my dog.

Thank you.

Yeah.

Our next question comes from the line of Scott Schonhaus with <unk>.

Bank capital markets. Please proceed with your question.

Hi team. Thanks for taking my question I wanted to focus on the oddity labs and the expansion of team and the expansion of the scope and the projects that you mentioned it was in the release are these expansions more related to our products and current brands marquee I've spoiled child are they for.

The news brand three launch related to acute skin and bank for just kind of understanding where these investments accelerated investments are going to thanks.

Lindsey Druckerman: And so I wouldn't, I'm not, I think you may be referring to the year over year growth rates, which is not the right way to think about it since we're really managing this in terms of demand pulse. So we increased 44% on a year over year basis for Q4. It's a much smaller quarter for us that's almost entirely repeat sales for us in Q4.

Oh hi.

So.

And for my cousin Schoolchild them lots of them.

It's being done through in labs now is born.

Which is somebody of the skin and body M, which we are planning to launch many products from labs for Brent tree and in overall labs.

Lindsey Druckerman: And now we've really turned the business on, and we're managing to try to get much closer to that kind of 20% long-term target for 2024. Although we're slightly ahead of that at 22 to 24, that's the type of growth rate we think is appropriate for the business to sustain. And we plan to deliver in that range every quarter of this year. I would just add one more thing that, again, in Q1, at the beginning of every quarter, we start again with user acquisition.

Visiting football well.

Honda like what we do there is exactly as Evan mentioned.

Hello.

The.

Absolute number one focus no I'm just trying to box today after we finish the call.

It does look and estimates, we say investment it's about people and I want to double the ph D is the number that we have done.

And we got no wrongdoing Berlin and the target to be more than 60 people at the end of the year, we are putting a lot of investment and he loves today, both goodwill in the way.

Lindsey Druckerman: And despite the high scale that we had in the past two months, we have seen an improvement in our marketing efficiency KPIs in terms of ROAS in Q1 of 2024 and 2023. So though we pushed and started again to acquire new users, the results are very strong. And we don't do it just because we need to. We do it when the market allows and we see massive demand out there. Thank you.

In building the lab to make sure that we have now.

Bipolar depression.

For both.

Thank you.

And we will have product ready do you see it.

But it didn't.

Hum.

But.

Okay.

Okay.

Why.

Okay.

By the way is like any other growth engines.

We launched them as I said before we always and just and ready to be launched basically.

I need more although I would have liked.

Scott Schoenhaus: Our next question comes from the line of Scott Schoenhaus with eBank Capital Markets. Please proceed with your question. Hi team.

They're ready to be launched we didn't you know mckesson boiler jobs, both and I think from lab, but he's gonna be all decision.

Oh.

Yeah.

Okay.

Hum.

Oran Holtzman: Thanks for taking my question. I wanted to focus on ODDITY Labs and the expansion of the team and the expansion of scope in the projects that you mentioned that were in the release. Are these expansions more related to products within current brands, you know, Maquillage, and Spoiled Child? Or are they for the new brand three launch related to acute skin and brand four? Just kind of understanding where these investments, accelerated investments, are going. Hi.

It takes time.

Long and he brought that forces them and it takes around two years to develop or that it will just slip from idea to molecule discovery all the way to win corporation them into the high school because he brought that exists in the market and we are using the best political discovery methods for Biogen nearing synthetic biology competition of chemistry.

Artificial intelligence and it starts all the way from the idea from where we've seen the user base. We see a segment that is craving for something better than we'd go back to lab, where somebody can be done.

Oran Holtzman: So it's important, and for Ilma Chiasi and Squali Child, lots of work done through in labs now is for, which is a medical skin and body care brand and which we are planning to launch many products from labs for brand three. And in overall, labs are built with full power. And as a reminder, like what we do there, exactly as Evan mentioned. This is the absolute number one focus now. I'm literally trying to bust it today after we finished our call.

Something better in terms of efficacy and then we start developing it and do them and use them the power of labs, So again multiple projects modem.

That that labs are now working on are not all of them will win them will be successful, but we don't need all of them because each and every one of them can be a category killer.

Thanks, Oren and I just a follow up there can you remind us on average how long it takes from the initial idea in molecule discovery.

Oran Holtzman: In terms of investments, we say investment is about people. I want to double the number of PhDs that we have this year. We are now around 30 people, and the target is to be more than 60 people by the end of the year.

Through any kind of regulatory process and then full commercialization on the molecule side. Thanks.

Oran Holtzman: We are investing a lot of money in labs today, both people in the way that in protocols, in building the lab to make sure that we have enough, that the pipeline will be sufficient for both end users. And we will have products ready this year to launch, and the intent is to be involved.

Sure. So it's around two years and I can get a bit more back. So maybe it's going to help you understand what we're doing labs for the future it starts by enveloping them.

Biological models for specific use of pinpoint replicating the cause in a cell based assay and evaluating it.

Oran Holtzman: And by the way, like any other growth engine that we build, it doesn't mean that we launch them, as I said before. We always keep engines ready to be launched based on their performance. So if we see that I need more power, I already have a few products out there ready to be launched. We didn't, in my case, spoil a child's boat and come in from the lab, but it's going to be our decision.

Once we then use a competition because it needs to search for molecules that will die because that certainly sports we use deep learning models to predict which molecules have the highest the highest chances of 14 with our target and we then perform a serious in because oh.

Oran Holtzman: It's every project they're working on. It takes time, it's a long and deep process, and it takes around two years to develop products at ODDITY Lab, from idea to molecule discovery, all the way to incorporation into the highest efficacy product that exists in the market. We are using the best molecule discovery methods for bioengineering, synthetic biology, computational chemistry, and artificial intelligence.

Two additional molecules and.

And then we go to safety and then all identified little molecule now evaluated in human trials with two other findings in lung function.

Results on the people and outperformed all existing modalities in the market and we have you know that that's the way to do it.

Sometimes takes them.

18 months, it can take two and half years, but in average it's two years from the moment that we.

We give them the dust and to go to market.

Thank you.

Our next question comes from the line of Youssef Squali with tourists Securities. Please proceed with your question.

Oran Holtzman: And it starts all the way from the idea, from where we've seen the user base. We see a segment that is craving something better, then we go back to the lab, we ask them if something can be done to create something better in terms of efficacy, and then we start developing it and use the power of the lab. So again, multiple projects, more than 20 projects that laboratories are now working on, and not all of them will be successful, but we don't need all of them, because each and every one of them can be a category killer. Thanks, Oran. And just to follow up there, can you remind us, on average, how long it takes from the initial idea and molecule discovery through any kind of regulatory process and then full commercialization on the molecule side? Thanks. Sure, so it's been around two years, and I can give a bit more background, so maybe it's going to help you understand what we do in labs for the future. It starts by developing biological models for specific use of pain points, replicating the underlying cause in a cell-based assay, and evaluating specific physiological cell responses.

Great. Thank you very much Lindsay can you help us think through.

Through your marketing spend cadence in 2024.

Overall and across both brands and then Oren spoiled child.

10 million in its first calendar year is really impressive and I believe is actually tracking ahead, we're aware.

Where it was back in 2019.

Launched in 2018, I think so do you think that kind of ramp for spoiled child in particular.

Can continue at a at a kind of a faster rate than what you've seen with Dell maquillage considering the much more developed platform now that youre writing. Thank you both.

Okay I'll start with the marketing questions. So we have a Marc we started the year with the significant ramp up in our in our acquisition spend or user acquisition spend versus the fourth quarter and generated very very effective returns on that marketing spend is Iran side.

Our ROE as in the first quarter of 'twenty four improved versus the first quarter of 'twenty three.

Oran Holtzman: We then use compositional screening to search for molecules that will drive the desired cell response. We use deep learning models to predict which molecules have the highest chances of working with our targets, and we then perform a series of in-vehicle cell enzyme-based assays to validate the composition of predicted molecules, and we go to safety, and then all identified little molecules are evaluated in human trials to ensure our findings in the lab transfer to real results in people and outperform all existing authorities in the market, and we let you know that that's the way It sometimes takes 18 months; it can take two and a half years, but on average, it's two years from the moment that we give them the task to go to market. Our next question comes from the line of Youssef Squali with Juris Securities. Please proceed with your question. Great, thank you very much.

In general for the year, we expect marketing will grow generally in line with sales.

And in terms of pacing.

What I would say is we typically have more repeat in the back of the year than in the early part of the year and as a result.

It is sort of how the cadence of marketing spend across the year flows.

Hum won't comment by brand, but a very big expectations for both brands. This year expect a very very strong performance driven in part by the excellent execution on marketing among other things.

Sure I will touch them and the cadence and then and then we'll connect you to spoil the child.

In Q1, 'twenty, three and I did a mistake and grew too much we grew 83%, which led to an insane growth of 57% for the full year and and and we decided not to do it again and do I strongly believe with good the goal for the long term is again as we mentioned before.

Youssef Houssaini Squali: Lindsay, can you help us think through your marketing spend cadence in 2024, overall and across both brands, and then Oran. Spoiled Child at $110 million in its first calendar year is really impressive, and I believe it's actually tracking ahead of where Il Makiage was back in 2019. It was launched in 2018, I think. So do you think that kind of ramp for Spoiled Child in particular can continue at a kind of faster rate than what you've seen with Il Makiage, considering the much more developed platform now that you're running? Thank you both.

But it was less than 20% EBITDA margin and and and by Beijing to growth I'm, assuming it will happen and we continue to be anyway.

For Q1, we built the model and managed to grow to support and 22% to 24% year over year and I was I will say it again.

Lindsey Druckerman: Okay, I'll start with the marketing question. So, we started the year with a significant ramp-up in our acquisition spend, our user acquisition spend, versus the fourth quarter, and we generated very, very effective returns on that marketing spend. As Oran said, our ROAS in the first quarter of 24 was better versus the first quarter of 23.

Basically the growth is but my decision, but even when we are facing to grow to 20% plus we are going with Wimbledon than my legacy competitors, which only single digits.

We are still securing the business early in the year age one it's still the most important figure for us in 2023, 6% of our revenue and we'll skip to the M. H, one and 24, we expect age one to represent a very similar number to 60%.

Oran Holtzman: In general, for the year, we expect marketing to grow generally in line with sales. And, in terms of pacing, you know, we expect to see a significant increase in our ROAS in the first quarter of this year. What I would say is, we typically have more repeat business in the back of the year than in the early part of the year, and as a result, you know, that is sort of how the cadence of marketing spend across the year flows. Won't comment by brand, but very big expectations for both brands this year, expect a very strong performance driven in part by the excellent execution on marketing, among other things. I will touch the rhythm, and then we'll connect you to Spoiled Child.

And we but we don't need to increase Q1 or the first off as a percentage of total EM year to do so and that's supposed to boil child I believe get splits out in 'twenty two 'twenty three to see what the brand potential awards and you know it's a new brand you don't know like what like what are the limits and and we wanted to get more data. So.

Oran Holtzman: In Q1 2023, I did a mistake and grew too much. We grew 83%, which led to an insane growth of 57% for the full year. And we decided not to do it again, although I strongly believe we could.

Allowed the reason quite a bit going from.

300% growth it was really my decision.

Them grow and no plans and no need to bleed Gilligan from like 24. So if you ask about the comparison between them against sports group that's been.

Oran Holtzman: The goal for the long term is, again, as we mentioned before, 20% growth plus and 20% EBITDA margin. And by pacing the growth, I'm ensuring that it will happen and will continue to be the same way. For Q1, we built the model and managed to grow it to support 22% to 24% year-over-year. And I will say it again, pacing growth is my decision. But even when we are pacing growth to 20% plus, we are going way more than my legacy competitors, which are in single digits. We are still securing business early in the year, age 1. It's still the most important period for us.

Yes, because that allowed you to grow faster than anybody else.

Early days I limit their growth and an end, but that's well that's the reason it was very consistent with our 25 million revenue to 400 million IRAK 400, many local revenue this year and dependent to continue to do the same with child, so off to a bit scaling now and we go back to a normal growth rate with the brand.

Oran Holtzman: In 2023, 60% of our revenue was captured in age 1, and in 2024, we expect age 1 to represent a very similar number to 60%, but we don't need to increase Q1 or the first half of the percentage of the total year to do so. As for Spoiled Child, I blitzed it in 2023 to see what the brand potential was. It's a new brand. You don't know what the limits are.

We'll make sure that everything.

Supporting that growth are in Florida.

Okay. Thank you both.

Yeah.

Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed with your question.

Good morning, and thanks, so much for taking my questions International grew 13% year over year and 2023. This low end market as a total growth of 33%.

Is there anything to call out there or is that one example of you guys holding back on growth initiatives and then Lindsey stepping back you guys have beaten the guidance by about $10 million each quarter.

Oran Holtzman: And we wanted to get more data. So I allowed the reason for the blitzkilling from all the 300% growth to be the reason for the blitzkilling. It was purely my decision. So I let them grow. No plan, and no need to blitzkill again in 2024. So if you ask about the comparison between Illumakiyash and Spoiled Child, yes, it grew faster than Illumakiyash because I

Is there something unique in 2023 or is there a way that we should be thinking about the conservatism that you're setting out in the guide and how we.

Set expectations for 'twenty encore. Thanks, so much.

Sure I will start with with the international and then Lindsay you can refer to the guidance.

Oran Holtzman: Back then, in the early days, I limited their growth. But for that reason, it was very consistent to put $25 million of revenue into $400 million, around $400 million of revenue this year. And the plan is to continue to do the same with Spoiled Child. So after blitzkilling now, we go back to normal growth rates with the brand to make sure that everything is supporting their growth level. Okay, thank you both. Our next question comes from the line of Andrew Boone with JMP Securities. Please proceed with your question. Good morning.

We see a message, but you didnt donation, rather suddenly before or other competitive it is.

Two thirds of their business, but we have not seen.

Finish coined in North America yet.

Either we are building out very strong localized experience.

Well each market, we enter which gives us strong and profitable performance from day, one when we launched new buckets and this is a big lever for us and we want to continue to use it again, it's my decision on quickly we want to pace growth.

Andrew M. Boone: Thanks so much for taking my questions. International growth 13% year over year in 2023. This is below El Makiage's total growth of 33%. Is there anything to call out there?

Due to the fact that we are fully direct consumer.

Can decide at any given moment, where do I want to spend the next dollar, meaning which brands and which brand and under which Glenn again, which category product and geography, all is being measured Dalian and reallocate based on that and we have more than 10, I want to say more than countries that are already in and tested.

Oran Holtzman: Or is that one example of you guys holding back on growth? And then Lindsay, stepping back, you guys have beaten the guidance by about $10 million each quarter. Is there something unique in 2023? Or is there a way that we should be thinking about the conservatism that you're setting out in the guide and how to set expectations for 2024. Thanks so much.

That we know is effect that we saw very strong results very strong unit economics, very strong scale and we've called in order to ensure that we have a significant runway ahead.

And that's it when we need those markets, we're going to open them.

Lindsey Druckerman: Sure, I will start with international, and then Lindsay, you can refer to the guidance. We see a massive opportunity in international, as I said before, for other competitors, it is two-thirds of their business, but we have not finished growing in North America yet either. We are building out very strong localized experiences for each market we enter, which gives us strong and profitable performance from day one when we launch new markets. This is a big level for us, and we want to continue to use it. Again, it's a decision on how quickly we want to pace growth and prioritize it. Due to the fact that we are a fully direct consumer, I can decide at any given moment where I want to spend the next dollar, meaning under which brand, in which brand, and under which brand again, category, product, and geography are all being measured daily and allocated based on that. We have more than 10, I want to say more than 10 countries that are already tested, that we know as a fact that we saw very strong results, very strong unit economics, very strong scale, and we pose in order to ensure that we have a significant runway ahead. And that's it.

Yeah.

Great all of them continue on the question about our guidance. So you are right as a public company and every time, we've spoken to you. We've over performed on every metric it achieved or mostly excuse he did on every single metric.

We committed to delivering this is one of the favorite things about when I first met Iran. He tells me I've never missed a budget and I never plan to and obviously as a CFO and for us and our team. That's that's really important in terms of building confidence with thought with our investors that we do what we say we're going to do and that's 100% on how we think about the business.

We set out you know very very big goals internally and.

We ensure every everything possible that we achieve them.

And then we also make sure that we're delivering to our investors our framework that we know we can always make good on and that's why we have so much conviction in our guidance for 2024, and our long term guidance because on an underlying basis. If we wanted to we could be delivering faster topline growth. We can see it I mean, it's very obvious to us based on how the firm.

Quarter has come together that we can do nicely ahead of the numbers that we're laying out for you today or we could also be a lot more profitable, but that's not the right way for us to approach. It if we want many many years of steady durable compounding as it relates to 2023, we did over deliver by a pretty wide margin.

Oran Holtzman: When we need those markets, we're going to open them. Great. I'll continue on the question about our guidance. So, you're right, as a public company and every time we've spoken to you, we have overperformed on every metric, achieved or mostly exceeded on every single metric that we committed to delivering. One of the favorite things about when I first met Oran, he told me, "I've never missed a budget, and I never plan to."

Some of that is because we ramped so much in the first quarter and the first half of last year, we had a sort of a a big wave of first orders that came in and we got a big wave of repeat in the back half of the year and we.

Lindsey Druckerman: And obviously, as a CFO and for us and our team, that's really important in terms of building confidence with our investors that we do what we say we're going to do. And that's 100% how we think about the business. We set out, you know, very, very big goals internally, and we do everything possible to ensure that we achieve them. And then we also make sure that we're delivering to our investors a framework that we know we can always make good on. And that's why we have so much conviction.

Always try to take a conservative approach to modeling, but we were overly conservative in modeling repeat and so ultimately that enriches quite profitable. So we ended up delivering ahead of plan. Our objective for 2024 and as you know our second year as a public company is to try to land the plane much more closely to our targets and.

So you know as you guys think about your models number one from a revenue perspective, we plan to Atlanta, playing much more in line with the guidance that we set out. In addition every incremental dollar of revenue upside we plan to reinvest in the business as I talked about in my prepared remarks, we think that's the.

Oran Holtzman: Our guidance for 2024 and our long-term guidance because, on an underlying basis, if we wanted to, we could be delivering faster top-line growth. We can see it. It's a very obvious test based on how the first quarter...

Amazing use of our capital for future value creation.

Yeah.

Thank you.

Our next question comes from the line of Dara Mohit.

C N N with Morgan Stanley. Please proceed with your question.

Lindsey Druckerman: I'm nicely ahead of the numbers that we're laying out for you today. We could also be a lot more profitable, but that's not the right way for us to approach this if we want many, many years of steady, durable competition. As it relates to 2023, we did over-deliver by a pretty wide margin. Some of that is because we ramped up so much in the first quarter and the first half of last year

Hey, guys good morning.

So we spent a lot of time on out of the labs, but obviously you guys are very excited about it can you just give us an update on how much of a revenue driver you expect that to be along with vision technology in 2024, and just what's embedded in the revenue guidance and then as you think about the.

<unk> development of the business over time looking out beyond 2024, how important each of those areas might be conceptually.

Lindsey Druckerman: We had sort of a big wave of first orders that came in, and we got a big wave of repeat business in the back half of the year. And we always try to take a conservative approach to modeling, but we were overly conservative in modeling repeat business. So ultimately, that end repeat is quite profitable, so we ended up delivering ahead of... Our objective for 2024 and our, you know, our second year as a public company is to try to land the plane much more closely to our target. So as you guys think about your models, number one, from a revenue perspective, we plan to land the plane much more in line with the guidance that we set out. In addition, every incremental dollar of revenue upside, we plan to reinvest in the business, as I talked about in my prepared remarks. We think that's an amazing use of our capital for future value. Thank you. Our next question comes from the line of Dara Mohsenian. Dara Mohsenian with Morgan Stanley. Please proceed with your question. Hey guys, good morning.

I don't want to give us exact numbers, but how do you think about it looking out over the next few years each of those areas.

Yeah, I can start and maybe even though you're enjoying it look we could we can deliver the results or the guidance for this year without any product commodity labs.

We are it seems already the product there.

The markets everything is ready to deliver everything without love it.

Having said that we want to test that loves what it.

And it means that probably in some of the revenue was helpful.

Yeah.

Yeah, Hi, I, just wanted to reemphasize, one point, which is.

All of the projects that lab is working on we think are very high impact we have a an amazing commercial team that works with the lab crew to decide what projects.

We want to work on and we really only target the markets. We think can be huge new drivers. So think about things that could replace tires sanctions that business.

And so it gives you an idea of what we expect the impact of what we're working on today.

Dara Mohsenian: So we spent a lot of time on ODDITY Labs, but obviously, you guys are very excited about it. Can you just give us an update on how much of a revenue driver you expect that to be along with vision technology in 2024 and just what's embedded in the revenue guidance? And then as you think about the commercial development of the business over time, looking out beyond 2024, how important each of those areas might be conceptually. I know you probably won't want to give us exact numbers, but how do you think about it looking out over the next few years, each of those areas? Yeah, I can start, and maybe Evan or Lindsey, you can join me.

I'm not sure.

Great and then can you touch on vision technology, a bad sorry, my phone cut out for a second but just cover how important that might be as you look out over the next few years.

Great.

I'll take this one because I figured I was having trouble with his line so.

Vision technology is a capability that we established with the acquisition of where did you want in 2021. There are so many applications for this technology, we really have the team prioritizing two objectives.

First is to make our existing matching capabilities stronger and the second is to build really new diagnostic tools as it relates to making our existing matching capabilities stronger.

Right now for example in our power match engine, where we're making product recommendations based on data alone what to use or tells us about themselves but of course, there's information that that we can glean above and beyond that sometimes things that they don't know about using vision and so incorporating vision into power match with something that we have.

Oran Holtzman: Look, we can deliver the results or the guidance for this year without any product from ODDITY Labs. We are, the teams are ready, the product, the market, everything is ready to deliver, everything without the labs. Having said that, we will go to test labs, and it means that probably some of the revenue will come. Yeah, hi. I just wanted to reemphasize one point, which is all of the projects that the lab is working on, we think are very high impact. We have an amazing commercial team that works with the lab crew to decide what projects we want to work on.

Really had been working on from the beginning last year, we had some more implementation. This year, we're going to take it even further we're still in pretty early days as far as how much vision, we can use.

For us to do better better matching but we're already seeing the benefits for sure and even though we've got 90% accuracy already in shade matching every you know incremental you know 50 basis points 100 basis points effectively close to for us to the bottom line. So that's already in process, you're already seeing it in our product today, you're already seeing it in our results for <unk>.

Dr. Evan Bao: And we really only target the markets we think could be huge revenue drivers. So think about things that could replace entire sections of business. And so it gives you an idea of what we expect the impact we're working on to be. I'm not sure.

Lindsey Druckerman: Great. And then can you touch on vision technology a bit? Sorry, my phone cut out for a second, but just explain how important that might be as you look out over the next few years. Okay, I'll take this one because I think Oran's having trouble with his lines.

Existing brands, but we expect more of that in the future. The next really big and transformational innovation for vision is how we implement it in brand three.

And as Ron talked about it whispering three we're really creating a first of its kind mobile platform that will number one support for full diagnostics or what are your skin issues or concerns using machine models data and AI.

Lindsey Druckerman: Vision technology is a capability that we will establish with the acquisition of OIDITY-1 in 2021. There are so many applications for this technology. We really have the team prioritizing two objectives. The first is to make our existing matching capabilities stronger, and the second is to build really new diagnostics, as it relates to making our existing matching capabilities stronger. Right now, for example, in our PowerMatch engine, we're making product recommendations based on data alone, what the user tells us about themselves.

And computer vision to do it number two what's the right treatment protocols. So what do you use to fix the issue and again using our machine learning models for those product recommendations and then finally coaching and upkeep, which will support compliance. So oftentimes for example, with an issue like acne your problem.

Get worse before it gets better and so that coaching component is really important for churn and vision is of course, a integral part in helping people understand how they're progressing and and and their improvement. So those are three applications for brand three envision that we think are truly groundbreaking and you'll hear us talk a lot more about that.

Lindsey Druckerman: But of course, there's information that we can glean above and beyond that, sometimes things that they don't know about, using vision. And so incorporating vision into PowerMatch was something that we really have been working on from the beginning. Last year, we had some more implementation. This year, we're going to take it even further. We're still in the pretty early days as far as how much vision we can use to do better matching.

And when we launched brand three and have it on the ground running.

Hi, guys can you hear me yeah, Yeah cool I would just add to that that we have around 30 people on the on the computer vision side.

Lindsey Druckerman: But we're already seeing the benefits for sure, and even though we've got 90% accuracy already in shade matching, every incremental 50 basis points, or 100 basis points effectively flows through for us to the bottom line. So that's already in the process. You're already seeing it in our products today. You're already seeing it in our results for existing brands, but we expect more of that. The next really big and transformational innovation for vision is how we implement it in brand three. And as Oran talked about it, with brand three, we're really creating a first-of-its-kind mobile platform that will, number one, support full diagnostics, so what are your skin issues and concerns, using machine models, data, AI, and computer vision to do Number two, what's the right treatment protocol, so what do you use to fix the issue?

Their own 20 out 20 out of the Saturday of walking on Brent Green for the agnostic and and for them and for the mobile application that we are building there and then the rest of the people are walking for Brent and one rental to which would you you know mckesson spoiled child, and we already see results better matching and better you'll need to go beyond economic.

Just based on that you shouldn't that you had with them with their computer vision.

Yeah.

Great and then if I can slip one more in you talked about managing the pace of revenue growth.

Two a bit more a manageable level this upcoming year versus 2023, when you're obviously, a very outsized growth.

Can you just talk about sort of how you think about that conceptually in terms of what level of growth is healthy for the business from a topline standpoint.

Lindsey Druckerman: And again, using our machine learning models for those product recommendations. And then finally, coaching and upkeep, which will support compliance. So oftentimes, for example, with an issue like acne, your problem might get worse before it gets better.

And how that impacts the long term revenue opportunity of the company and how you think about that relative to profitability.

Yeah. So the way that we measure everything is based on contribution meaning EBITDA level based on the brand.

Lindsey Druckerman: And so that coaching component is really important for churn. And vision is, of course, an integral part in helping people understand how they're progressing and their improvement. So those are three applications for brand three and vision that we think are truly groundbreaking. And you'll hear us talk a lot more about that when we launch brand three and have it on the ground. Guys, can you hear me?

We don't spend and and media and dollars against product that we don't see and very strong results in terms of 12 months or 24 months and deck with dilution margin. So every dollar that you spend is more or less equal otherwise he would spend against something else in terms of visibility and end.

Oran Holtzman: Yes. Yes? Cool. I would just add to that that we have around 30 people on the computer vision side, and around 20 out of the 30 are working on brand 3 for the agnosis and for the mobile application that we are building there, and the rest of the people are working for brand 1, brand 2, which is in my case in Spoiled Child, and we already see results, better matching and better unit economics just based on the addition that we had with the computer vision. Great.

And and managing the growth again with less deal with something unique.

Well scale all stated I allowed for both John and again, if somebody goes we didn't have this because they didn't know their repeat numbers, if you're going to see from the brand and the and the results were very very strong. That's the main reason pool and pull them additional golar. If he had EM against olive garden and end and when you.

Dara Mohsenian: And then, if I can slip one more in, you talked about managing the pace of revenue growth to a bit more manageable level this upcoming year versus 2023, when you're obviously experiencing very outsized growth. Can you just talk about how you think about that conceptually in terms of what level of growth is healthy for the business from a top line standpoint and how that impacts the long-term revenue opportunity of the company, and how you think about that relative to profitability? Yeah, so the way that we measure everything is based on our contribution, meaning the EBITDA level, based on the brand. We don't spend media dollars on products that we don't see. Very strong results in terms of 12 months and 24 months direct contribution margins. So every dollar that you spend is more or less equal; otherwise, you will spend it against something else.

Hope that you are modeling no bigger again, it's a good problem to have but repeat rates are the main drive that and called hold them or our people and it's less about when we spoke with you shouldn't because in Q4, even if you're clucked, yeah, we almost like we cut and and and and and.

Way less than what we.

So it's.

The only about with it.

Great. Thank you.

Yeah.

Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question.

Great. Thanks, Hey, good morning.

So I know what you know in the prepared remarks and through the conversation since you talked a lot about where are you reinvesting in proactive reinvestment in any incremental dollar goes back into reinvesting for future growth.

But we have gotten asked by people prior to the call just about sort of cost of growth I'm thinking back when they to your mentioned earlier of the like the high return model of our software business. So if we look out over let's call. It. The next five years, maybe you guys tell me what the right time frame is when should we think of.

Oran Holtzman: In terms of visibility and managing the growth, again, last year was unique because it was the first year of full-scale or full-scale that I allowed for a child. And again, it's something that we didn't have because we didn't know the repeat numbers that you're going to see from this brand. And the results were very, very strong.

Oran Holtzman: That's the main reason for the additional dollars that we had against our guidance, and we hope that we are modeling this now better. Again, it's a good problem to have, but repeat rates are the main driver for our bids. And it's less about user acquisition because in Q4, even in Q3 last year, we almost cut and spent way less than what we are going to spend. So it's purely about the. Great, thank you.

That sort of high incremental returns.

Business model being more apparent externally again, I understand the notion of investing for future growth, but just putting together the high return model and that'd be incomplete completely visible externally versus the continuing to invest for future growth.

Lauren Rae Lieberman: Thank you. Our next question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question. Thanks.

Yeah, I can just say that look we even now for this year and if you ask me in a few months back I would say that they want to guys for only 20% EBITDA margin, but we still need to be this is way more profitable and there is a limit to how much you can invest in future and initiative this year and therefore, we guided for around 20.

Oran Holtzman: So I know, you know, in the prepared remarks and through the conversation since you talked a lot about where you're reinvesting and proactive reinvestment, any incremental dollar goes back into reinvesting for future growth. But we have gotten asked by people prior to the call about the cost of growth, and I think back, Lindsey, to your mention earlier of the like the high return model of a software business. So if we look out over, let's call it, the next five years, maybe you guys can tell me what the right time frame is. When should we think about that sort of high incremental returns?

2%, so the abuses already with even with all the investments that you are doing is already way more profitable and but but again. If you asked me what they want to do I want to stick with the with this number I want to continue to invest in the future. There is so much to be done again, the two massive transformation in the industry. We see one of them is online which is technology, that's what we need.

Oran Holtzman: business model being more apparent externally. Again, I understand the notion of investing for future growth, but just putting together the high return model and that being completely visible externally versus continuing to invest for future growth. Yeah, I can just say that, look, even now for this year, if you asked me a few months ago, I would have said that I wanted to guide for a 20% EBITDA margin, but we saw that the business is way more profitable, and there is a limit to how much we can invest in future initiatives this year. And therefore, we guided for around 22%. So the business is already, even with all the investments that we are doing, is already way more profitable. But again, if you ask me what I want to do, I want to stick with this number.

To continue to invest them attacked them to ensure that we and that we are way ahead in terms of our competitors and the second is OTT lab I believe that they didn't do it.

The opportunity that is Matthew attitude that Grand Prix Brentsville every new brand that we launched in the first year or two you know and we need to invest and therefore and as we continue to invest around that as you continue to invest around and already lab as we continue to bring more brands. This is the future of the company.

And this is why I'm still here. This is like we are here to build something otherwise I would tell the business. So the plan is 100% to continue to invest and there is no reason in my view to deliver more than 20% of the business is already generating so much goes with zero debt and and and and I don't see a reason to deliver a 30% EBITDA margin.

Oran Holtzman: I want to continue to invest in the future. There is so much to be done. Again, there are two massive transformations in the industry that we see. One of them is online, which is technology. That's why we need to continue to invest in our tech team to ensure that we are way ahead in terms of our competitors. And the second is ODDITY Lab.

Let me just add I'll, just add one thing to that so as you think about again the returns on our business one important differentiator versus.

Oran Holtzman: I believe that the opportunity there is massive. Adding to that brand three, brand four, every new brand that we launch, the first year or two, we need to invest. And therefore, as we continue to invest in tech, as we continue to invest in ODDITY Lab, as we continue to build more brands, this is the future of the company. And this is why I'm still here.

And you know any any big duty or consumer conglomerate is our ability to build brands organically.

And as I mentioned, we launched spoiled with $20 million of upfront investment spoiled is over $100 million of not revenue today for us. If you were to apply a beauty M&A multiple of five to 10 times revenue you'd have to pay 501 billion, a 500 million to $1 billion to acquire that and so.

Oran Holtzman: This is like, we are here to build something. Otherwise, I would sell the business. So the plan is 100% to continue to invest, and there is no reason, in my view, to deliver more than 20%. The business is already generating so much cash. We have zero debt.

Oh without opining specifically on on spoil, but just you know to kind of measure the the return on capital for US building brands organically versus a big legacy conglomerate you can see theres, just a sort of step function change on the type of ROI you can deliver with our model as our land and expand type model as we're gaining.

Oran Holtzman: And I don't see a reason to deliver 30% of that amount. So let me just add one thing, Lauren. So as you think about, again, the returns on our business, one important differentiator versus, and you know, any big beauty or consumer conglomerate is our ability to build brands organically. And as I mentioned, we launched Spoiled with $20 million of upfront investment. Spoiled has over $100 million of net revenue. Today, for us, if you were to apply a beauty M&A multiple of 5 to 10 times revenue, you'd have to pay $500 million to $1 billion to acquire that.

Our new share of existing wallets at very very high incremental margins, so sort of at maturity. We believe our model lends itself to higher you know higher return profile versus the legacy model that being said you know.

We are a fraction of market share of a massive global market and there are so many ways for us to grow I I you know we could be growing like this for many many many years before we even close to hitting a wall. So it's really hard to say at any point in the forecast horizon, you're going to see us actually deliver those types of returns.

Lindsey Druckerman: And so without commenting specifically on Spoiled, but just to kind of measure the return on capital for us, building brands organically versus a big legacy conglomerate, you can see there's just this sort of step function change in the type of ROI you can deliver with our model as a land and expand type model as we're gaining a new share of existing wallets at very, very high incremental margins. So sort of at maturity, we believe our model lends itself to a higher return profile versus the legacy model. That being said, we are a fraction of the market share of a massive global market, and there are so many ways for us to grow. We could be growing like this for many, many, many years before we're even close to hitting a wall.

Because we are the higher margin profile for you know specifically because we have so many ways to grow that it just I I don't see anywhere in the forecast horizon, where we're going to actually be delivering that because we have so many ways to invest for growth.

I just have one more.

One regarding <unk>.

<unk> margins when we launch full child, although it was an amazing success. The first years 2022 it had single digit EBITDA margin and second year was already double digit, but it doesn't mean much yes, no they're running very strong EBITDA margin, but again it takes time, so when we launch but for example, like it will be it will it will cost us.

Lindsey Druckerman: So it's really hard to say at any point in the forecast horizon where we're going to see us actually deliver those types of returns because of the higher margin profile specifically because we have so many ways to grow. I don't see anywhere in the forecast horizon where we're going to actually be delivering those types of returns because we have so many ways to invest. I just want to add one more thing regarding margins. When we launched Full Child, although it was an amazing success, the first year, 2022, it had a single-digit EBITDA margin, and the second year was already double-digit, but it was less than Machiaj. Now they're running very strongly with the margin, but again, it takes time. So when we launch Band 3, for example, it will cost us in terms of margins, and therefore, every band that we launch, it damages our margins in the short term, but long-term, it supports high growth with very healthy margins.

In terms of margins and therefore every vendor to a lounge and damages showed them our margins, but long term, it's about high growth and and and and with very healthy margin otherwise you wouldn't understand against it.

Okay. That's really helpful. One more quick thing on brand three on an M. P. Acne I think at one point you talked about having sort of a pharmacy element to this and now you're saying medical grade. So I just wanted to check in on that you know is there still sort of an online or at pharmacy function.

And that's going to be part of this or is it medical grade something different.

Yeah, Yeah, it's gonna be both M M OTC and end in Iraq, and we're not going to start with our own pharmacy would start with third party and just because of the regulation because we want to see what works and what doesn't before we.

Oran Holtzman: Otherwise, we will not spend it. Okay, that's really helpful. One more quick thing on brand three for acne. I think at one point you talked about having sort of a pharmacy element to this, and now you're saying medical grade. So I just wanted to check in on that. You know, is there still sort of an online or pharmacy function that's gonna be part of this, or is it medical grade, something different? Yeah, it's going to be both OTC and RX. And we are not going to start with our own pharmacy; we'll start with a third party, just because of the regulation, because we want to see what works and what doesn't before we invest so much in it. But it's going to be both.

We invest so much against it and but he's gonna be both.

Okay, and then when can we expect to hear more about brand for just that where you know beginning of March 2024, I'm just curious how to think about when Youll give us an update on you know what category or anything more specific about what brand for what looked like.

That's the first thing to tell my team I don't know yet.

Again, and there is a reason why we are working on those things quietly and our three brands now Brent for ease into making them. Both my sister and I are involved there was already a tender and once we have something to show we will.

Lauren Rae Lieberman: Okay, and then when can we expect to hear more about brand four, just that we're, beginning of March 2024? I'm just curious about when you'll give us an update on, you know, what category or anything more specific about what brand four will look like. First, I need to tell my team. My team doesn't know yet, but again, there is a reason why we are working on those things quietly, and three brands now, brand four is in the making, both my sister and I are involved, there is already a team there, and once we have something to share, we will. Okay, sounds good.

Okay. It sounds good thank you.

Thank you there are no further questions at this time I would like to turn the floor back over to Ron Holtzman for closing comments.

Thank you very much guys for joining and we will talk with you when we report the first quarter.

Good day Bye bye.

Yeah.

Yeah.

This concludes today's teleconference. You may disconnect your lines at this time.

You for your participation.

Oran Holtzman: Thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to Oran Holtzman for closing comments.

Mhm.

[music].

Oran Holtzman: Thank you very much, guys, for joining us, and we'll talk with you when we report on the first quarter. Have a great day. Bye-bye, www.ottobock.com This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.?? You've done some real great work for this job! Also, you'll get an e-mail from the will, theder there asking you to pay an audience fee! So get ready to join them, but before you send it to me, you just need to dismiss it. Also, check out this nostalgic movie clip in the original soundtrack. You need to follow Soledad to everything she did. You're supposed to follow a very unique movie space where she met a fairy, and she knows exactly where Dolores lives. How does anyone else in the Three Projects www.ottobock.com and The Review Bunker? Check out the full show list below!

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