Q1 2025 Oddity Tech Ltd Earnings Call
Good morning, and welcome to <unk> first quarter 2025 earnings Conference call.
Today's call is being recorded and we have allocated time for prepared remarks and Q&A.
At this time I'd like to turn the conference over to Maria like Chorus Investor Relations of four oddity. Thank you you may begin.
Maria: Thank you operator, I'm joined by Ron Holtzman are these co founder and CEO and Lindsay Drucker Mann Oddities Global CFO and is priced at a D. C. T. O will also be available for a question and answer session.
Speaker Change: As a reminder, management's remarks on this call, but you're not concerned past events are forward looking statements. These may include predictions expectations or estimates, including statements about oddities business strategy market opportunities future financial performance and potential long term success.
Speaker Change: Looking statements involve risks and uncertainties and actual results could differ materially due to a variety of factors.
Speaker Change: These factors are described under forward looking statements in our earnings press release issued yesterday and our most recent annual report on form 20-F filed with the Securities and Exchange Commission on February 25 2025.
Speaker Change: We do not undertake any obligation to update forward looking statements, which speak only as of today.
Speaker Change: Finally during this call we will discuss certain non-GAAP financial measures, which we believe are useful supplemental measures for understanding our business.
Speaker Change: Additional information about these non-GAAP financial measures, including their definitions are included in our earnings press release, which we issued yesterday.
Iran: I'll now hand, the call over to Iran.
Iran: Thanks, everyone for joining our call today, our Q1 results exceeded our expectations across all metrics and allow us to raise our full year outlook.
Iran: Once again in Q1 25, we'd beat revenue and EBITDA like we did everything in the quarter as Glenn public eight quarters in a row.
Iran: Revenue grew 27% to $268 million with $52 million of adjusted EBITDA, representing a 19, 5% of adjusted EBITDA margin and free cash flow of $87 million.
Iran: Q1 is our biggest quarter of the year in terms of user acquisition and important quarter to set the stage for the rest of the year and we've proved we can deliver also in accordance with government.
Iran: Exiting Q1 business momentum continued across April and gives us confidence in delivering our strong Q2.
Iran: The beauty industry is transforming just like we said it would be more than five years ago.
Iran: And all it is a winner in this information we've positioned our business to play and lead in the most important vectors the industry's growth.
Iran: Number one is the consumer shift to online where we already are dominant DTC platform.
Iran: And number two is the shift towards high efficacy products, where we are accelerating other capabilities quality labs, whilst continuing to invest in all areas of product development.
Iran: I have no doubt that these two vectors are by far the most important drivers of the future of Davidson.
Iran: Therefore, we continue to invest massively in technology data driven user customization and science backed product.
Iran: Our goal is to build one of the biggest beauty companies in the world full stop we intend to do it by delivering consumers the best product based on what they need when they need it while doing all of this at high scale.
Iran: Thanks to the fact that beauty and health all major industries.
Iran: So many areas for us to expand our business into and we are planning to continue doing so with flu Butler.
Iran: Our Q1 results were another step in achieving this goal we delivered outstanding financial once again, beating our guidance in revenue and profitability, we hear other companies talking about consumer weakness and political environment, but as you can see today, we continue to grow fast.
Iran: Do you think will do approximately $800 million in revenue in 2025 going from around $300 million in 2022, and there on $500 million in 2023, all those deals with very healthy profitability and cash generation.
Iran: The first quarter is the biggest revenue quarter for us in the year and was the highest baseball 'twenty 'twenty four to grow from its low we don't know what you like physician muscle on adding unions are slow platform.
Iran: We entered 2025 with a lot of strength with preparation work for 2024 that gave us confidence in our ability to meet that would go.
Iran: This allowed us to deliver a massive acceleration to our business in Q1. So that's real once again more than doubled the sales we delivered in Q4 as planned we have full control of the whole business and we do it once again in Q1.
Iran: The advantages of our D to C model on full display in the cones environment, while brick and mortar brands navigate weak store performance against volatile demand our business is benefiting from a powerful shift online and highly agile asset light model with full visibility and inventory control.
Iran: Turning to over 2025 strategic priorities and outlook first continuing to drive existing brands.
Iran: Starting with <unk>, which remains on track to meet our 1 billion dollar revenue growth by 2028.
Iran: <unk> continues to be a standout success and it's on track to approach 40% of the brand revenue this year.
Iran: Skin is a huge growth driver when will you put attractive product categories with big Thumbs I E. L D and great replenishment cycle for even like yes, that's spending.
Iran: As we discussed in our Q4 call, we decided back in 'twenty 'twenty four to accelerate our international expansion in 2025.
Iran: Most of that did you focus on international was growing up would be just in existing markets, while continuing to conduct test in your markets. We are very pleased with the results from Q1 and plan to continue our international scaling.
Iran: We remain bullish about our international business would show greater economics, just to put it perspective for the largest competitors listen 30% of their business is in the U S for us the U S is going to be around 80%.
Iran: This ability to get scale internationally the message engine for taking it.
Iran: The best we said this is a great option for us to grow in Q1, we are starting to prove it.
Iran: Product categories, New brand new markets, new users versus existing users all of those muscles as they call it growth drivers on demand.
Iran: All of them to preserve our high profitability.
Iran: Every moment, we decided to where it makes more sense to scale, which makes the business, so strong and profitable enabling us to continue to deliver the skills combination of scale growth and profitability.
Iran: Well, it's Charlotte was second baby continuing strong growth in the third year since launch.
Iran: It remains in its early stages and we believe it has a huge runway in front of it. It is on track to cross the $200 billion revenue Mark this year with very healthy margin again for three years old brand.
Iran: Our teams have been focused on optimization of unit economics, while we drive scale, we continue with our brand investment in Q1 with a second global spoiled Charles collaboration with fashion designer Jeremy Scott.
Iran: Second is our new brand launches, we are very bullish on the opportunity for both brands three and four in addition to growth building new brands allow us to maintain its total G&A, which is extremely cushion in my view.
Iran: Brent Barry is on scheduled to soft launch in Q3 with formal launch in Q4.
Iran: Every muscle rebuild I want to believe we are getting better with time and for Brent career I can tell you that based on the level of complexity, both technology and product offering.
Iran: The operation and are testing I'm more excited than ever before to save lives and we will do whatever it takes to win Brent treats categories.
Iran: As a reminder, brand carries a telehealth platform, starting with medical grade skin and body issues.
Iran: And into new medical domains overtime, almost a third of the global population experienced skin conditions and diseases, including acne eczema, whereas they shouldn't others. Additionally, many individuals report the skin condition significantly affected too emotional wellbeing, which made the submission even more important quality of the company.
Iran: We see also how we use the base skin and body concerns are broad pain portfolio.
Iran: Around half of them are suffering from at least one of these issues.
Iran: Female doing much as it is.
Iran: Spoiled shell Brent with fully D to C O.
Iran: Our product offering is very compelling in our view. It includes office, two prescription and OTC treatments, enabling full personalization to user profiles.
Iran: Very good.
Iran: Computer vision is a key component of Braintree, our Israeli R&D teams are working on developing it for the past three or four years with very large investment.
Iran: One example is our occupancy waiting algorithms trained with dermatologist input they delivered 94% agreement with expert dermatologist bagging internal validation studies.
Iran: Another is the acne lesion localization classification models that allow us to identify map measure only classify lesion with 93% recall, meaning the model correctly identified 93% of true acne lesions.
Iran: We've also developed the Hyperpigmentation detection model that Sigma and classifieds discoloration with 84% matching at Jersey Baseball Dermatologists label data.
Iran: We've introduced the predicted real algorithm trained on use of data and powered by Gen. AI to visualize expected skinny improvements boosting motivation and trust group authorization program reviews.
Iran: Our vision tools are crucial to winning this category. It allows us to assess your progress on high frequency basis supporting that progress when you combine with the proportional medical evaluation.
Iran: We believe that we have the ability to change. This has got to go with that when you're offering.
Iran: It's still telehealth infrastructure infrastructure, we are building to support prescription compounding for Brent <unk> today is a jumping off point for us to expand into additional medical domain beyond skin and body post launch.
Iran: Brent phone continues to be on track for 2026, a bigger part of your enforced with more updates to come.
Iran: Third is already loves as well, we continue to increase our investments growing up with teams expanding our internal R&D as well as outside partnerships to accelerate discovery at high scale, our mission that allowed us to drive massive innovation by bringing real science at high scale to our industry and global sales and distribution through <unk> online platform.
Iran: All the scientists and teams are actively developing both short and long term innovation in skin color hair and body to beat the efficacy of existing product in those spaces.
Iran: Developing proprietary molecules for both the three and four in the short term, while also walking on longer term development with huge market potential.
Iran: Said before loves takes time, and we don't need it to meet our financial targets, but if we do it right. It's a complete game changer for us they can take the company to a different level and almost unlimited site.
Iran: I believe we are in their wasteful high efficacy signs of better products and we do all we can to win this race.
Iran: Lastly, as our tech capabilities, where we continue to invest in order to deliver the best experience for our customers online and to enable the profitability at high scale.
Iran: We are deploying both dollars and focus on developing new products and improving existing ones to drive meaningful improvement.
We are very focused and we will get high pace to meet our goals.
Iran: Before I hand, it over to Lindsay I want to close with some thoughts about the current environment. We see this moment is a massive opportunity for it in our DNA and business model allow us to play full offense in times like today and this is exactly what we do.
Iran: Operating in a huge and attractive global them, which has proven time and time again to be resilient in economic downturn, the structural changes in the industry, including the growth of online not only strengthen our lithium and as you can see in our Q1 results and Q2 outlook our business performance remains very strong.
Iran: But where we stand today, our advantage can only grow in times like these moments like this when it got to go a little self built and this is all the intention with that I will turn it over to Lindsay.
Lindsay: Thanks, Iran, turning to our Q1 results, which I'll refer to on an adjusted basis you can find a full reconciliation to GAAP in our press release.
Lindsay: He delivered another record breaking result for our most important quarter of the year recall that in Q1, we set the tone for the full year by ramping up our acquisition spend which leads to high visibility backlog of repeat that drives our full year financial results. We came into Q1 this year off a large base from our strong performance in 2000.
Lindsay: <unk> 24, and delivered an outstanding result on top of that net revenue grew 27% to $268 million exceeding the high end of our guidance for 24% growth to $262 million. The strength was driven by both El Maquillage and spoiled child.
Lindsay: That revenue growth was driven primarily by increased orders average order value increased 4% year over year.
Lindsay: Order value was driven in part by a mix to higher priced products like skin. It was offset in part by faster growth in international market, which today tend to be lower due to the earlier development stage.
Lindsay: We continue to expect order growth will be the primary driver of our revenue growth going forward.
Lindsay: Our Q1 results stand in contrast, the concerns we hear about softness and other beauty care.
Lindsay: Including both retailers and wholesalers. This is directly related to our unique model our exposure to online which is the most attractive growth channel for the beauty category today, and our very high repeat rates as our customers continue to come back with high satisfaction to our product brand repeat revenue, it's the largest part of our business.
Lindsay: <unk>, 60% of total revenue in 2024, and increasing as a percent of our business again, so far in 2025.
Lindsay: Moving down the P&L gross margin of 74, 9% expanded 116 basis points year over year and exceeded our guidance for 72%. The upside was driven in part by cost efficiencies and product mix we.
Lindsay: We delivered adjusted EBITDA of $52 million and adjusted EBITDA margin of 19, 5% above the high end of our guidance for $50 million.
Lindsay: We continue to ramp up our planned investments in future growth initiatives, including brand three which is planned for soft launch in Q3 and full launch in Q4 brand for which is planned for launch next year, an oddity labs, we delivered adjusted diluted earnings per share of <unk> 69 cents compared to our guidance of between two he wanted 63 times.
Lindsay: In Q1, we once again delivered excellent free cash flow of $87 million or free cash generation and cash conversion is a clear reflection of the strength and quality of our business model. This.
Lindsay: This strong cash generation allowed us to exit the quarter with $257 million of cash equivalents and investments on our balance sheet and zero debt between the cash on our balance sheet and our new Undrawn $200 million credit line that was closed in January with ample liquidity to operate our business and deploy opportunistically.
Lindsay: We expect the current volatile market backdrop will create new opportunities for us to put our strong balance sheet to work and we're actively looking for those this could take the shape of brand and business acquisitions that plug into our platform or acquisitions of technology and teams that advance our capabilities.
Lindsay: Even with our enthusiasm for these opportunities we're extremely disciplined about what we would pursue and our internal hurdle rates are high.
Lindsay: Turning to our outlook for 2025 Q2 is off to an excellent start with good momentum through the end of April the size of the first quarter combined with the high predictability of cohort repeat gives us good visibility to once again exceed our long term algorithm of 20% revenue growth and 20% adjusted EBITDA margins, we now expect full year revenue.
Lindsay: Growth will be between 22 and 23%.
Lindsay: I mean, 790 and $798 million.
Lindsay: We're raising our gross margin outlook to 71% for the full year from 70% prior and this incorporates our latest view on tariffs and supply chain impact.
Lindsay: We're also raising our adjusted EBITDA outlook to $157 million to $161 million and our adjusted EPS outlook to $1 99 to $2.04, which assumes a 20% tax rate and no share buyback.
Lindsay: As we've discussed before our EBITDA outlook includes significant increased investments in future growth initiatives, including our new brands, an oddity labs, but with no revenue contribution benefit from these efforts.
Lindsay: Finally, let me take a moment on tariffs the ultimate tariff and trade policies are very much in flux and our teams are working aggressively to mitigate the impact on our P&L.
Lindsay: Relative to other consumer companies, we're very well positioned we have an attractive gross margin structure limited exposure to China directly a robust and flexible supply chain and great relationships with our global suppliers we can.
Lindsay: Spectrum car between 50, and 100 basis points of tariffs and related costs on a gross margin of 2025, some of which will be offset by internal efficiencies and other mitigation efforts based on the information. We have today. We expect these headwinds will be manageable, allowing us to increase both our gross margin and adjusted EBITDA dollar outlook for the full.
Lindsay: Yeah. It is too soon to give specific guidance on 2020 six but our current expectation is for the impact of tariffs and trade policies to be similarly, manageable and we have no concern today about achieving our long term algorithm of 20% revenue growth at a 20% adjusted EBITDA margin with that I'll hand, the call back for questions.
Lindsay: Thank you.
Speaker Change: Ladies and gentlemen, we will now be conducting a question and answer session.
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Speaker Change: Request participants please limit to one question and one follow up and rejoin the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: Ladies and gentlemen, we would wait for a moment, while we poll for questions.
Our first question comes from Youssef Squali with twist Securities. Please go ahead.
Youssef Squali: Thank you very much good morning, all so congrats on a very solid quarter.
Youssef Squali: Considering the macro guys I have two quick questions one on international or I think just as a follow up to your comments.
Youssef Squali: How much of a lift did international contributing to the quarter because it was really only on the last earnings call that you guys started talking about maybe accelerating international is spoiled child now are starting to be expand into international markets and secondarily.
Youssef Squali: The FTC recently passed the click to cancel rule I was wondering how you guys are thinking about that as potentially impacting the business or not thank you very much.
Speaker Change: Good morning, Thank you very much for joining Luke.
Speaker Change: Look last year, we made a strategic decision to push into a national holiday 25, which meant scaling markets. We are already in.
Speaker Change: And while we are also pushing larger scale dust in new markets.
Speaker Change: We talked about in Q4, that's the good thing about our business like everything is prepared and once we want to pull that trigger everything is ready international has been a core part before it then especially for taking it.
Two $1 billion revenue target by 2028, so we needed them.
Speaker Change: Did great in Q1, it's only prudent.
Speaker Change: It was sent to me how big this market will be for us and we expect that they will deliver great growth for us in the future.
Speaker Change: To your question both U S and international grew double digits in Q1 necessarily still less.
Speaker Change: Less than 20% of the business. So by definition, we needed them high growth in the U S. But we are very bullish and we will continue to push it.
Speaker Change: Yeah.
Speaker Change: Thanks, Keith just on click to cancel this piece of regulation has been out for a while our teams have already done a lot of work on it and ultimately we don't see much impact at all obviously, we don't know what the final implementation will look like but we're already in very good shape in terms of how we approach subscriptions.
And cancellations everything for us is opt in rather than opt out which is different than many direct to consumer businesses, including the likes of Amazon. For example, a cancellation is fully self serve online and straightforward.
Speaker Change: A great team of of customer service reps that support out there.
Speaker Change: And thousands and millions of orders.
Speaker Change: The year and of all the change we've tested a number of different changes depending on your interpretation of the ruling and none of them have a major impact on our business. So we expect this to be a non issue for us.
Speaker Change: Okay. That's super helpful. Thank you congrats again.
Speaker Change: Thank you guys.
Speaker Change: Thank you.
Speaker Change: The next question comes from Mark Mahaney with Evercore ISI. Please go ahead.
Mark Mahaney: Okay. Thanks, I think Lindsay you talked a little bit about the gross margins could you just double click on that a little bit more and the biggest factors that are causing gross margins to rise where do you think they can go is it if something changed in how you think about where your gross margins can go over the next three to five years, just what efficiencies you've been able to wring out or is.
Mark Mahaney: Is it just scale that's allowed those gross margins to rise. Thank you.
Speaker Change: Thanks, Mark So gross margin was a nice highlight for us in the quarter, but as we said before and I just want to reiterate gross margin is not a metric or K P. I am that the teams are benchmarked to rather than gross margin, we focus on VC margin or contribution margin, which is basically gross margin after media spend.
Speaker Change: And it's important because there are some products that might have a lower gross margin profile, but better frequency and if they deliver a superior D. C margin, we're happy to make that trade and we never want to constrain our teams in going after the right opportunities as it relates to L. T V and N D C margin.
Speaker Change: In favor of I have a gross margin outcome, obviously, it's a metric that that my team looks at a lot and obviously as it relates to cost.
Speaker Change: It's something that team has been very focused on and so over the last few years as you've seen us over deliver on gross margin. Some portion of that hasn't really great execution from our teams across a number of areas I mean, it's truly blocking and tackling and parts of supply chain logistics fulfillment et cetera. So that was the support for us in the quarter.
Speaker Change: But also when we issue our gross margin guidance, we like to give the teams a lot of latitude.
Speaker Change: To chase after the types of products that makes sense again from a D. C perspective, and so that we're not disappointed street expectation. So it's been a line that we've historically guided conservatively.
Speaker Change: That being said as we look longer term, we've talked about the right kind of run rate for our gross margins to be more in the high high Sixty's kind of range. So you should not expect and we are not committed to maintaining the 71% gross margin profile that we're achieving this year. However, we are very committed to maintaining adjusted EBITDA margins.
Speaker Change: Which is the right metric for you guys to focus on AR of 20% or more one less thing that I would add them. When we decide to push skin skin is highly <unk> and therefore higher gross margin.
Speaker Change: Those things can change based on our decision on what products, we want to push into the market.
Speaker Change: Thank you very much.
Speaker Change: Thank you.
Cory Carpenter: The next question comes from Cory Carpenter with Jpmorgan. Please go ahead.
Cory Carpenter: Thank you. Good morning, I had you excuse me an ongoing three Ron you mentioned, you're more excited than ever to see it like could you just expand on what Youre seeing I think last quarter. You said you had 100 test groups that we're in action.
Speaker Change: And then secondly, Lindsey on tariffs. Thank you for the gross margin Constitution could you just talk about some levels of carriage.
Speaker Change: Maybe specifically that youre, assuming that's embedded in that guidance. Thank you.
Speaker Change: Just to make sure Brent rate right.
Speaker Change: Yes Brendan.
Speaker Change: Okay cool.
Speaker Change: We are working on Braintree modem or close to four years. So when I say that I'm excited that I have two reasons to be excited.
Speaker Change: We tested a lot them. The most important part was to be able to.
Speaker Change: To build them visit technology and we are in a battleship that's what I hope to be a full launch.
Speaker Change: I don't need to justify that the coffee just got degrees huge really didn't know that.
Speaker Change: More than one third of them of the U S consumer suffering from one of the areas just to be able to tackle.
Speaker Change: Coupled with this brand launch so I have no doubt the demand is there and I also know that.
Speaker Change: The reason why we developed this brand is because we saw very poor M. M options Oh, the sort of consumer so we have the right product and we have the right technology and the market is there and I have no doubt that we can that we can win.
Speaker Change:
Speaker Change: One important board was also very complex for US now because we are closer to launch I can see it is the product range is it's it's the widest product.
Speaker Change: And then just we ever launch both OTC and prescription.
Speaker Change: We built infrastructure and multi category and and everything was tested at high scale to make sure that we have this like boats, the matching and works well and also a very strong product. So that's why I'm, saying that we are in good shape, because we saw some deaths and things.
Speaker Change: It looks great.
Speaker Change: Korea on the tariff question as we've talked about in my prepared remarks in 2025, we expect there to be something like a 50 to 100 basis point impact on our gross margin from the flow through of tariffs and in 2025. We described this is manageable and actually we hope that we can bring that overall.
Speaker Change: <unk> lower and then looking into 'twenty 'twenty six while we're not giving explicit guidance. We also see the level of pressure as manageable and nothing that would get in the way of us delivering on our long term algorithm of 20% revenue growth the 20% adjusted EBITDA margins. The current contemplated in our guidance is that the current.
Speaker Change: Level of tariffs that have been announced obviously this is a moving target, but in our assumptions at the fully loaded amount for China, plus the 10% on Europe. However, the a range of 50 to 100 basis points would still be correct. Even if you saw a doubling of European tariffs. After the 90 day pause and I just want to reiterate to everybody.
Speaker Change: We are truly in a fortunate position because our exposure is just not that big we have very high gross margins as a starting point, 71% for this year and that just means from a numbers basis, even even at a higher tariff scenario. It's just a smaller proportion of the cost base and a higher proportion of the revenue base.
Speaker Change: And of course, our exposure to them the most challenging areas and in particular, China is is limited because most of our costs come out of Europe.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: The next question comes from Dara <unk> with Morgan Stanley. Please go ahead.
Dara: Hey, good morning.
Dara: So first just one clarification on the increased international emphasis would you say is that more related to scaling existing markets or is entering new markets. That's a big piece of that.
Dara: Either in 2025 or longer term as we think about that increased emphasis and maybe specifically how spoiled child fits into that.
Dara: And then just obviously your balance sheets in great shape can you just update us on how big a priority acquisitions might be and when you think about acquisitions, what's the strategic lens, you're most focused on is it more technology is it more brands what areas or are you most focused on when you.
Dara: Think about M&A going forward and potentially areas that could add value.
Dara: Sure.
Dara: International is.
Dara: <unk> opportunity for us as we said, it's only 20%.
Speaker Change: And in early testing, which is close to nothing for spoiled child.
Speaker Change: But it also is around 70% of their business. So the opportunity is huge.
Speaker Change: Over.
Speaker Change: The last few years, we've made investments in building those markets, mostly in Europe, but also selectively outside of Europe to position us to scale and for each market and we have totally localized experience and we have tested live in market thousands of order.
Speaker Change: And only after we see like those strong metric then we decide to launch markets. We are in now and after the official launch on U S, Canada, U K, Germany, Australia, and Israel, New market that you already tested the cloud scale and contributed already revenue Oh for example, France, Italy and Spain.
Speaker Change: We recently also began testing in some larger developing markets and the results are very strong.
Speaker Change: Therefore, we are very bullish as for M&A I would just say that we're looking to find things that we don't have okay.
Speaker Change: And that's the truth and were notable brands. If we see a brand that has a very strong protocols I'm. Just we don't have internally what would take us five or 10 years to build then it makes sense edelman debt, mostly around biotech and AR and AI. Those are the areas that I'm spending time on and and we believe that this is the future of the industry.
Speaker Change: Need to lean even even further.
Speaker Change: I just wanted to add one more thing Derrick to your to the first question, which is to talk about you know part of why we feel so bullish about 2025 is not only just at the category. We operate in has historically been quite resilient, but just how diversified our business is today.
Speaker Change: Then even before multiple product categories.
Speaker Change: Now in multiple markets that can grow into and a very agile model that allows us to identify and chase into demand. So if you think about few years ago, We had one brand with stomach yards and one category in color and just one market essentially in the U S. By the end of this year, we're gonna have three brands in four categories and in several.
Speaker Change: Different markets and this just allows us a lot of flexibility on growth and profitability.
Speaker Change: Thanks, guys.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Andrew Boone with citizens JMP. Please go ahead.
Speaker Change: Yeah.
Andrew Boone: Thanks, So much for taking my question one thing I wanted to ask about SG&A.
Andrew Boone: Is there any way that you can pull back the curtain and help us maybe understand the advertising component of SG&A and kind of the growth that you saw maybe year over year.
Andrew Boone: Additionally, I would love to understand also the efficiency of the advertising spend.
Andrew Boone: I think the IPO you guys were targeting kind of a three X 12 months payback period can you just update us on where you are today on that that'd be helpful.
Andrew Boone: And then Ron with in your prepared comments it sounded like you talked about the potential optionality with and having now a telehealth infrastructure platform can you speak to that what else may be possible. Once you guys do have now a wider kind.
Andrew Boone: Infrastructure base for future brands. Thanks, so much.
Speaker Change: Great Andrew I'll start with your first question so when.
Speaker Change: We never talked about a target of three <unk>. So we had sat around the time of our IPO was that our 12 month LTV to CAC, we're around three X, but it's not an explicit target for US are obviously, what we care about what we've talked about the most is maintaining that 20% adjusted EBITDA margin, which we've been able to do.
Speaker Change: Handily, even as we're ramping up investments in a lot of these future growth initiatives.
Speaker Change: To dig into where the investments for the future are I mean, when we talk about that first of all just to reiterate that we have a lot of Oh, we have a big commitment to maintaining these investments in the future. We don't see a reason to deliver higher than the 20% EBITDA margin, especially because we really believe these investments can be mass.
Speaker Change: On loss for our business performance. The town is just way too big and the opportunity too large for us not to reinvest and that's just as a reminder, we generate very high returns on capital are the best place for an additional dollar for US has been reinvesting in the business and we'll continue to do that so it's areas like new brand development we have.
Speaker Change: What already in the base and that will be ramping across the year behind brands and three and four both brands already has a nice sized teams in place, although we'll be adding to them. These are on our payroll and of course part of the numbers you see today labs, which we're continuing to build them as a large investment.
Speaker Change: We're building systems teams and a lot of infrastructure a lot of attack we already have over 60 scientists.
Speaker Change: In labs in Boston is really the Best example of our our mindset for the next two to three years. This is mostly going to be expensive, but we feel a lot of conviction it'll pay off in the future and then of course attack continues to be the largest team and the company are super important for us to continue reinvesting to preserve our competitive advantage.
Speaker Change: <unk> new type products that we will use to drive conversion L. P D and satisfaction, that's really that the bread and butter of the business you saw us with an ankle higher early this year with bionic. We're continuing there's just a lot more that we can do with our tech platform that we continue to invest so I think those are kind of the key buckets of SG&A investment of course in addition to continued.
Speaker Change: To.
Speaker Change: Drive our marketing spend a year over year, along with our revenue.
Speaker Change: I will address the telehealth, but like the way that we think about things we've built capabilities and then we extend and we built that deck and data it didn't make sense to have just one brand or one category. So we'd explore charging a little bit more brands.
Speaker Change: It's the same should mode.
Speaker Change: The same way that we view this as a.
Speaker Change: For all the telehealth platform.
Speaker Change: Once you have the infrastructure once you have the Doctor was once you have the ability to.
Speaker Change: <unk> prescription product then you're in a very good shape to extend them and for competitive reasons, obviously I cannot show, which areas, but you can imagine that this this potentially some messy for us it took us years to build it but it's something that they want to do the pool for a long time.
Speaker Change: Thank you.
Speaker Change: Thank you.
Speaker Change: This concludes our question and answer session I would now like to hand, the conference sort or Ron Holtzman for closing remarks.
Ron Holtzman: Thank you very much guys for and meeting as today and see you next quarter.
Speaker Change: Yeah.
Speaker Change: Thank you this.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time.
Speaker Change: You for your participation.
Speaker Change: [music].
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: [music].