ODDITY Third Quarter 2026 Earnings Call - ODDITY TECH LTD

Explicit Guidance:

• Raised FY2026 net revenue outlook to a decline of approximately 18.5% (previously guided for ~25% decline).
• Raised FY2026 Adjusted EBITDA guidance to a range of $32 million to $34 million (previously $18–$20 million).
• No specific numerical guidance provided for FY2027 revenue, margins, or growth; management states the goal is to return to overall growth in 2027.

Business-Segment Outlook:

• Spoiled Child: On track to grow at least 35% for FY2026, approaching $350 million in revenue; strong double-digit growth in Q3 with excellent repeat rates; expecting "exciting product lineup" for 2027 with at least 5–6 new products; viewed as a "repeatable playbook" proof point.
• Methodic: On track to beat Spoiled Child's first-year revenue performance; plan to expand into medical grade products and categories in 2027, specifically launching prescription injectable therapies (NAD+, semaglutide) and six additional peptide therapies under HHS Enforcement Discretion; aims to build a leading offering in longevity and metabolic health.
• Il Makiage: Goal to normalize revenue and return to growth in 2027; currently resolving algorithm dislocation with primary ad partner; sequential improvements noted in Q3; focus remains on fixing the U.S. market before prioritizing international expansion.
• Audity Labs: Pipeline includes proprietary molecules for anti-aging (collagen, L-Stain, NAD+) and expansion into hair growth, hyperpigmentation, acne, and eczema; early readouts from in vitro/ex vivo testing and focus groups described as "promising."
• Brand 4: Scheduled for launch in 2027; targeting billion-dollar revenue potential alongside existing brands.

Market and Competitive Outlook:

• Peptides/Longevity: Management views the market for peptides, longevity, metabolic health, and cognition as "highly attractive" with large reversible markets; anticipates significant demand and sees an opportunity to emerge as a main winner despite new entrants.
• Pricing/AOV: Acknowledges mid-single-digit AOV declines driven by mix shifts (lower first-order AOV vs. repeat); expects AOV headwinds to subside in 2027 as first-order declines stabilize.
• Distribution: Reaffirmed commitment to 100% Direct-to-Consumer (DTC) model; no current plans to broaden distribution via Amazon, though exploring "new distribution where it makes sense" in the future.

Macro / Industry Outlook:

• Regulatory (HHS): Positive impact anticipated from HHS Enforcement Discretion Policy published last month regarding peptide therapies; views approval as "very easy" for expansion.
• Advertising: Reliance on a single dominant advertising partner (covering >50% of category); managing volatility in Return on Ad Spend (ROAS) and CPA due to ongoing algorithmic reset; expects volatility to persist in near term (Q4) until structural fix is complete.
• GLP-1 Tailwind: Identifies growth in GLP-1 usage as a positive tailwind for the wellness/beauty sector, specifically benefiting brands like Spoiled Child.

Strategic Initiatives:

• Product Launches 2027: Most exciting product slate in company history planned across all brands; includes ~8 new products for Spoiled Child, 5–6 for Il Makiage, and a expanded roadmap for Methodic including peptide therapies.
• Infrastructure: Leveraging existing online clinical intake, national pharmacy fulfillment, and licensed provider networks for the upcoming peptide launch.
• Innovation Model: Continued investment in "Audity Labs" utilizing AI and digital biology for drug discovery-style molecule development; operating with a "test fast, fail fast" culture to identify high-impact innovations before scaling spend.
• International: International expansion for Spoiled Child noted as "upside," but immediate focus remains on fixing the U.S. market for Il Makiage.

Risks and Headwinds to Outlook:

• Ad Algorithm Dislocation: Primary risk to Il Makiage recovery; solution requires daily iteration and partner sign-off, creating near-term revenue volatility.
• Inventory Levels: Il Makiage carrying excess inventory from prior purchase commitments; expects to achieve better inventory balance in 2027.
• Execution Risk: Management notes inherent risks in executing multiple major launches (Brand 4, peptides) while simultaneously stabilizing Il Makiage.
• Competitive Landscape: Peptide market expected to open quickly with multiple e-commerce/telehealth vendors entering, potentially driving up acquisition costs.
• Capital Constraints: $86 million remaining on $200 million buyback authorization; $550 million in zero-coupon 2030 exchangeable notes outstanding.

Management Tone on the Future:

• Confidence: Highly optimistic regarding the long-term potential of the platform, Methodic's entry into longevity/peptides, and the 2027 growth rebound; CEO expresses daily, intensive personal involvement in fixing Il Makiage.
• Caveats: CFO describes FY2027 outlook as "too early" to quantify; explicitly avoids guiding to 2027 numbers, citing current volatility and the need for upfront investment in first-order acquisition to restart the flywheel.
• Strategic Shift: Emphasis on moving from stabilization (2025/2026) to "offense" and "growth mode" in 2027, supported by strong cash balance ($561M) and undrawn credit facilities.

Miscellaneous:

• Capital Allocation: Opportunistic share repurchases continued (11.7M shares in first nine months of 2026); $86M authorization remaining; zero-coupon notes partially repurchased ($50M in June).
• Share Count: Diluted share count approximately 23% lower year-over-year due to repurchases.
• Free Cash Flow: Generated $10M in Q3; $3M YTD; goal is to utilize strong liquidity for strategic investments rather than aggressive debt reduction or dividends at this stage.